Americans Still Have $1.7T in Savings as Recession Looms

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Thanks in part to government intervention during the pandemic, Americans have banked about $1.7 trillion in savings, according to the Federal Reserve.

And as the Wall Street Journal (WSJ) noted in a report Sunday (Oct. 30), this could make it more difficult for the Fed to deal with inflation. After two rate increases this year, another 0.75 percentage point rate hike is likely to arrive this week following a two-day policy meeting that ends Wednesday (Nov. 2), the report notes.

And those rates could climb even higher, the WSJ notes. People’s household savings “suggests to me we may have to keep at this for a while,” said Federal Reserve Bank of Kansas City President Esther George in a recent webinar.

Much of that $1.7 trillion figure is held by more affluent Americans, with $350 billion in excess savings — or $5,500 per household on average — held by people in the bottom half of the country’s income bracket.

Read more: Savings Not Enough to Blunt Paycheck-to-Paycheck Pressures

PYMNTS’ data finds that savings have begun to dwindle as people deal with surprise expenses and rising inflation. As we reported in July, close to half of U.S. consumers had faced at least one unexpected expense in the prior 90 days, with 56% of those expenses costing more than $400. The average emergency expense was approximately $1,400.

Meanwhile, living paycheck to paycheck is becoming the norm: Equally many Americans now live paycheck to paycheck without issues paying their bills as those who do not live paycheck to paycheck. Wealthier people are not immune to these trends, either, as the share of high-income consumers living paycheck to paycheck has risen over the last year.

Our research earlier this year found that savings for people who live paycheck to paycheck but do not have issues paying their bills had dropped to a bit more than $6,800, down from more than $8,300 at the height. The situation seems a bit dire for the paycheck-to-paycheck consumers who struggle to cover monthly expenses, and where the average savings here stands at less than $3,000, compared to upwards of $4,000 at the peak.