US economy: savings continue to underpin consumer spending
■ Real disposable income growth is sluggish and the savings rate continues to decline
■ Excess savings on the stock side are declining but are still healthy, supporting consumer spending
The number of job vacancies in the Job Openings and Labour Transfers Survey (JOLTS) in October stood at approximately 10.33 million, peaking in March this year (approximately 11.86 million), and is still at a high level, although it is slowly declining. In a sign of the strength of labour demand, the proportion of the labour force (total of employed and unemployed), known as the prime-age population (25-54 years), to the working-age population (16 years and over) stood at 82.4% in November, after approaching its pre-New Corona Disaster peak (83.1% in January 2020) at 82.8% in August. Growth has been sluggish. Supply and demand in the labour market remain tight, and the composition is likely to continue to make it difficult for upward pressure on wages to weaken.
Disposable income per capita in the US in October (seasonally adjusted, annualised) was USD 56434 in nominal terms, up 0.1% on the previous month. This is an increase of 10.6% from February 2020 (USD 51028) before the new Corona disaster, showing a steady upward trend on the back of wage growth. However, in real terms, taking into account price trends, it has remained in a flat range this year at USD 45323, down 1.4% from before the new Corona disaster (USD 45948 in February 2020). While inflation has halted the decline in purchasing power, this suggests that the environment is becoming less conducive to increased consumer spending.
Against this backdrop, the savings rate (savings/disposable income) stood at 2.3% in October, well below the 2015-2019 average (7.6%), indicating that on the flow side the pace of saving is more restrained than in normal times. On the stock side, on the other hand, savings have remained built up after the new Corona disaster. According to the Flow of Funds statistics released by the US Federal Reserve on 9 September, US household savings (the sum of savings and current accounts, savings and time deposits, and MMFs) amounted to USD 17.8 trillion in the July-September period; although growth has been sluggish after peaking in the January-March period (USD 18.0 trillion), it is expected to increase in the October-December 2019 period (USD 12.8 trillion) USD), it has been significantly built up since. The decline in real disposable income due to high inflation is compensated for by the reversal of savings through benefits and other means, and the probability of an early setback in private consumption is small. On the other hand, assuming that the average 2015-2019 trend continues to the present, household savings are now estimated to be USD 14.4 trillion. If the upward deviation from the trend is defined as excess savings, they peaked at USD 3.4 trillion in the July-September period (USD 3.9 trillion) and have been on a downward trend since the January-March period (USD 3.9 trillion). The pace of reversal of excess savings will continue to need to be carefully monitored.