“I’m worried,” says the top economist

Citigroup CEO Jane Fraser sees “cracks” among some consumers as savings dry up

Amid heightened economic uncertainty, Americans are saving less overall.

The personal savings rate — how much people save as a percentage of their disposable income — was 3.9% in August, well below a decade-long average of about 8.9%, according to the latest data from the U.S. Bureau of Economic Analysis.

Still, consumers continue to spend, which has contributed to economic growth and could ultimately be the reason the country enters recession after all, despite more than a year of dire forecasts.

“If you’re confident about the future, you don’t need such a high level of savings,” said Diana Feargott-Roth, an economics professor at George Washington University and former chief economist at the U.S. Department of Labor.

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That doesn’t mean consumers are in the clear. In fact, many have problems that are just as big or even bigger than before.

When the Covid pandemic brought the economy to a standstill and the US government released trillions in stimulus money, American households were suddenly sitting on a cache of cash.

“It was the first recession in U.S. history in which disposable income increased,” said Tomas Philipson, a political science professor at the University of Chicago and former acting chairman of the White House Council of Economic Advisers.

But these cash reserves have now largely been used up after consumers gradually used up their excess savings from the Corona years.

Rising inflation in the wake of the pandemic made it harder to make ends meet. At the same time, the Federal Reserve’s most aggressive rate-hiking cycle in four decades made it more expensive to borrow.

“I’m worried,” Philipson said. “People are affected on both fronts – lower real wages and higher wages.”

Why Americans will save less in 2023

That makes it particularly difficult to set aside money, said Winnie Sun, co-founder and managing director of Irvine, Calif.-based Sun Group Wealth Partners and a member of CNBC’s Financial Advisor Council.

“Some are working on tighter household budgets and have not adjusted their spending as much in line with the rise in inflation, so they have not been able to save more even though they knew they had to.”

According to a Bankrate study, nearly half (49%) of adults have less or no savings compared to last year Opinion poll.

More than a third now have more Credit card debt Another Bankrate survey found they have more than cash reserves, the highest on record, and 57% of adults said they couldn’t afford a $1,000 emergency expense.

According to an analysis by , the average American’s savings are 32% below what they should be compared to their salary DollarGeek based on data from the Fed’s Survey of Consumer Finances.

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