A recent headline on the website Drudgereport.com quotes a study purporting that 41 percent of Americans have adopted a minimalist lifestyle.
The COVID-19 pandemic has caused more Americans to save more of their disposable income in the face of growing economic uncertainty. This is a response seen in past periods of uncertainty in our country during wars, depressions and recessions.
The personal savings rate was in the range of 7 percent to 8 percent from 2015-2019, according to the Bureau of Economic Analysis, a unit of the U.S. Department of Commerce. The personal savings rate jumped to 32.2 percent in April 2020 and 19 percent in June, the most recent period surveyed.
One of the unique characteristics of the pandemic is that wide swaths of the economy have been shut down. People’s choices to go to restaurants, travel, stay in hotels, attend sporting events and take in live entertainment have been sharply reduced.
Looking at the savings rate in that context it’s not surprising to see it rise —where could you go to spend your money?
One of the great economic questions of our day is whether Americans will maintain their high savings rate or revert to past behavior once we return to some semblance of normalcy.
Many institutions have a stake in that answer: Will people come back and when?
Will you reschedule that family reunion? Take a cruise? Go to Disney? Head back to the ballpark?
If your answer is yes to the above, then you are very bullish on the American economy. If no, we are in for a much slower and much longer recovery.