(Bloomberg News) Americans are likely to keep rebuilding their savings for years to come as the specter of job losses and the meltdown in stocks triggered by the recession lingers, economists say.
Households are putting money away at a pace more than double that leading up to the economic slump. The saving rate has averaged 4.8 percent since June 2009, when the 18-month contraction ended, compared with 2.2 percent in the three years leading up the downturn.
"Households are going to be mired in this deleveraging environment for a few more years," Ellen Zentner, a senior U.S. economist at Nomura Securities International Inc. in New York, said in a telephone interview. "That's not atypical following a financial crisis."
The need to boost cash reserves and pay down debt may eclipse the urge to be the first on the block to drive the newest model car, stemming a recent decrease in the saving rate. Almost three years into the recovery, the economy has yet to regain even half the 8.8 million jobs lost or the $16.4 trillion in household net worth washed away as a result of the recession, indicating consumers will want to keep a bigger cash cushion.
"A savings rate in the neighborhood of 5 percent is one that would allow consumers to prepare for long-term obligations and yet will support the economy in the short-term," said Guy LeBas, chief fixed-income strategist at Janney Montgomery Scott LLC in Philadelphia.
Pent-up demand for automobiles helped propel a 0.8 percent gain in consumer spending in February, the biggest in seven months, according to Commerce Department data. The pickup carried over into March as figures this week showed retail sales also advanced 0.8 percent, reflecting stepped-up purchases of furniture, clothes and electronics.
Stronger earnings, reflecting in part the recent pickup in sales, are boosting share prices. The Standard & Poor's 500 Index climbed 0.3 percent to 1,376.50 at 2:13 p.m. in New York. General Electric Co., Microsoft Corp. and Schlumberger Ltd. reported profits that topped analysts' estimates.
Shares also rose on better economic news elsewhere. A report today showed German business confidence unexpectedly increased in April for a sixth month.
The increase in U.S. consumer spending pushed the saving rate down to 3.7 percent in February, the lowest in more than two years and matching the level in August 2009 as the weakest of the current expansion, Commerce Department data show.
Such profligacy will probably not go unchecked, according to analysts like LeBas. The ups and downs of the job market underscore the need to keep saving, he said.