Personal Saving Rate Plunges As Americans Get Back To Spending More Than They Earn

Back in the good old days of the mid-2000s, before that whole unpleasantness with the global financial crisis and the near-depression and what have you, Americans lived like kings. Kings, I say, with big-foyered mansions and six-wheeled Humvees purchased entirely with borrowed money because being fiscally prudent is the sort of thing terrorists do.

Then when the whole near-depression thing hit and the banks repossessed our mansions and Humvees, we were forced to live like cave-dwelling Taliban, "saving" our money instead of spending it. When we had money, that is.

Well, those days seem to be over. We're back to spending more money than we earn. Yay?

The Commerce Department reported this morning that Americans jacked up their spending in February by 0.8 percent from the month before, even while their incomes only increased 0.2 percent. Take inflation into account, and we actually lost money in February, the third decline in the past four months, while still managing to raise inflation-adjusted spending at the fastest rate since September. Boom. Take that, Osama's ghost.

As a result of this kick-ass mismatch between spending and income, the personal saving rate, which is the government's measure of how much Americans save -- the percentage of disposable income we don't blow on lottery tickets and smokes -- tumbled to 3.7 percent, the lowest rate since a similar 3.7 percent back in August 2009.

To find a lower saving rate, you have to go all the way back to December 2007, when the rate was just 2.6 percent. Hmm, what's special about December 2007? Well, that's when the recession officially began, according to the National Bureau of Economic Research.

Not long after the recession started, the personal saving rate soared to a peak of more than 8 percent.

The saving rate settled down during and after the recession, but hung around 5 percent for most of the past two years -- well higher than the record-low rate of 1 percent, set back in 2005, which happened to be the peak of the housing bubble.

See the pattern there? Credit-fueled spending orgy results in super-low saving rate. Come-to-Jesus hellfire of a recession results in a super-high saving rate.

Even after the hellfire recession, the savings rate stayed high as consumers tried to work off their Staten Island Fresh Kills landfill of debt.

Now the saving rate is drifting down again. Good news, right? Maybe not, say economists, who are not called "dismal scientists" for nothing:

"It is a little worrying that, as real incomes are still falling, faster real consumption growth is due to households reducing their savings," worried Capital Economics in a note to clients.

"This [spending] is not sustainable without deterioration in savings and/or better income gains," wrote David Ader of CRT Capital.

To tell the truth, for better or worse, it seems unlikely that consumers are really getting back to their drunken spending ways. What's more likely is that consumers are having to eat their seed corn just to cover expenses, thanks to fairly stagnant wages and rising gasoline prices -- up to $3.925 nationally, according to AAA.

There are lots of ways this could end well. An improving job market should lead to stronger income gains in the future, economists say. That could help consumers keep spending while also bulking their savings back up. Gasoline prices could fall, another boon to the savings rate.

It is encouraging that consumer sentiment is rising, according to the latest Thomson Reuters/University of Michigan survey.

But there are also lots of ways for this to end badly: If job growth stalls, or if incomes continue to stagnate, or if gas prices don't fall. Or, far less likely, if banks decide to start lending to consumers again to fuel more drunken spending binges.

No matter how you cut it, it's hard to really take much pride in a falling savings rate.