The BEA just revised the personal saving rate, and doubled it. Source: Wall Street JournalTo commenters bemoaning the low and declining personal saving rate I found the graph in Greg Ip's column in the Wall Street Journal, but updates seem not to show it. Greg ties it to the business cycle:Previously, it looked like much of ...
John H. Cochrane considers the following as important:
The BEA just revised the personal saving rate, and doubled it.
Source: Wall Street Journal
To commenters bemoaning the low and declining personal saving rate
I found the graph in Greg Ip's column in the Wall Street Journal, but updates seem not to show it. Greg ties it to the business cycle:
Previously, it looked like much of last year’s acceleration in consumer spending came by dipping deeper into savings, a sign of an expansion in its later stages. The Bureau of Economic Analysis has since found wages and self-employed income were much higher than it first estimated, so the saving rate, instead of sliding to around 3%, stands at 6.8%—in line with its average since 2012. The expansion now looks middle-aged (albeit late middle-age) rather than old.
Personal saving is one of the less well defined and measured concepts in economics. Is housing equity included? Is the value of employer pension plans included? (What if those pensions are massively underfunded?) If you own stock, but the company invests out of retained earnings, giving you a capital gain, is that included? (Economically it's the same as paying profits as income, then issuing new stock to finance investment, which would show up as your saving. But we'd pay a lot of taxes, which is why most corporate investment is financed out of retained earnings.)
The definition should conform to the question. If you want to know whether Americans are prepared for retirement, then the average saving rate doesn't really matter, and you should include social security and medicare. If you're worried about debt buildup, then you're worried about some households saving too little and others saving too much, not the average. If you want to think about the trade balance and capital formation, then you want the national saving rate and don't include social security. And so forth.
Economic policy is also schizophrenic about saving. Half of the time hands are wrung that Americans don't save enough. The other half -- or really all the time -- policy pundits want Americans to consume more in the name of stimulus, meaning save less, or worry about "savings gluts" driving asset price "bubbles" or "secular stagnation."
I couldn't find the BEA's explanation of what changed. It's something to do with finding more income among self-employed people, and I guess more income - the same consumption = more saving. But where was that income before? If blog readers know where the BEA explains the change in methodology or can comment directly, send a comment or an email.
In real life I'm a Senior Fellow of the Hoover Institution at Stanford. I was formerly a professor at the University of Chicago Booth School of Business. I'm also an adjunct scholar of the Cato Institute. I'm not really grumpy by the way!