February 1, 2007

Hey, Big Spenders!

-1%

That’s the (negative) percentage of their after-tax income that Americans saved last year — the lowest savings rate since 1933 when, in the depths of the Great Depression, one in four workers were jobless.

Last year, average Americans not only spent everything that they earned, but dipped into savings or borrowed money to pay for their purchases — at a negative 1.0%, the savings rate for 2006 was the lowest it has been since 1933, in the depths of the Great Depression, according to a new Commerce Department report. Back then, of course, unemployment was sky-high, with one-in-four workers unable to find a job. In 2006, in contrast, the unemployment rate averaged a modest 4.6%. Still, according to a recent Pew Research Center survey, more than three-quarters (77%) of all Americans describe themselves as the kind of person who “always looks for ways to save money.” This paradox is not as stark as it may seem, for nearly two-thirds (63%) of Americans also acknowledge they don’t save enough, and more than a third say that they often (11%) or sometimes (25%) spend more than they can afford. Asked what they splurge on, people most frequently cite food and restaurant dining, followed by entertainment and recreation, then shopping and personal items. Read More