Wealthy Americans are saving more

DELPHINE TOUITOU - The coronavirus pandemic has wiped out millions of jobs in the United States, but it’s had the unexpected effect of increasing savings rates among Americans, especially wealthy people stuck at home and forced to give up travel and entertainment. Along with the dramatic reduction in leisure spending, things like government stimulus checks, unemployment benefits and the suspension of monthly loan repayments for more modest earners have swelled the bank accounts of Americans who are usually known to be crumbling under debt. Americans have accumulated $1.8 trillion in excess savings in the 11 months since the start of the pandemic, according to figures released this week by Barclays and Oxford Economics. “And, we estimate that this number could rise to $2.5 trillion by this summer,” Gregory Daco, chief US economist at Oxford Economics, said. The savings rate of Americans, which averaged seven to eight per cent before the crisis, spiked to a record 33 per cent in April 2020, thanks to a massive $2.2 trillion Covid relief package for households and businesses, according to Bureau of Economic Analysis data. The savings rate was holding at 13.7 per cent at the end of December, though decreasing as various forms of aid expired. It jumped in January to 20.5 per cent after $600 stimulus checks were included in a $900-billion plan adopted by Congress at the end of December. And, it could rise again this spring, as lawmakers consider the Biden administration’s $1.9-trillion relief package. Overall, the savings trend has highlighted the disparities between rich and poor in the United States, with wealthy households saving much more than families of modest means who have been hardest-hit by job losses and have used stimulus money mostly to pay bills. The richest Americans were generally able to maintain their jobs through teleworking — their income has remained constant while spending has plunged, resulting in excess savings. — AFP