The personal saving rate averaged 4.5 percent last year through November, down from 5.3 percent in the same period a year earlier. The saving rate is still up from a record-low 2 percent reached in July 2005.
“Last year, the consumer by reducing the savings rate boosted GDP,” Feldstein said in the television interview. “We’re going to see more of that as a result of this big increase in wealth that occurred though the stock market.”
Goldman Sachs economists wrote in a Dec. 27 note to clients that “the saving rate can fall a bit further as household wealth is increasing, credit conditions are easing, and the labor market is improving.”
Roach isn’t buying it. Savings will rise closer to historical levels and that will keep a lid on spending, he says. The saving rate averaged about 9 percent between 1970 and 2000.
‘Anemic’ Spending
“We’ve got several more years of surprisingly anemic consumption growth,” Roach said in an interview, predicting “at least two to three years” of 2 percent advances in consumer spending. “The path is well short of 3 1/4 percent norms we’ve become used to historically in the United States.”
Job market healing could help. Though a Jan. 10 report showed employers added 74,000 jobs in December, the smallest gain since January 2011, that was at odds with better gains throughout the year. Employment increased by 2.19 million positions in 2013, averaging more than 180,000 jobs a month.
Still, that’s little changed from 2012, and it’s shy of the sustained 250,000 readings Roach says would boost his economic outlook.
Plus, the portion of prime working-age adults in the labor force dropped to 62.8 percent in December from 65.8 percent five years before. Some 3.9 million Americans have been out of work for more than 27 weeks, and Congress hasn’t reached a deal to continue extended unemployment insurance, which expired in December.
Tempered Growth