Tags: Feldstein Consumers Need to Save More | Spend Less

Feldstein: Consumers Need to Save More, Spend Less

Friday, 07 Jan 2011 11:55 AM

Americans are saving less now that the crisis is ebbing, and that trend needs to stop, says Martin Feldstein, former chairman of the Council of Economic Advisors.

If Americans don't save more and spend less now, consumer spending will eventually suffer once the money is gone — again.

"Households are not saving much, the savings rate used to be 6 ¼ percent, it’s a full percentage point less than that, so that adds substantially to the increase in spending over the last six months," Feldstein tells CNBC.

Consumers will have no choice but to save more in the near future, as household wealth remains about 20 percent below pre-recession levels on a real per capita basis, Feldstein says.

Consumer spending last November rose for a fifth straight, according to the latest government data.

The Commerce Department says spending rose 0.4 percent after increasing by an upwardly revised 0.7 percent in October, according to Reuters.

Savings rates slipped to 5.3 percent, the lowest since March.

Meanwhile unemployment rates, the key to more lasting economic recovery, are improving.

The unemployment rate in December dropped to 9.4 percent last month, its lowest level in 19 months.

While some found work, others quit job hunting and thus removed themselves from the work force.

A smaller work force lowers the unemployment rate figure published in headlines, but it doesn't mean new jobs are out there.

"It's a bit of a mixed bag," Ryan Sweet, an economist at Moody's Analytics, tells The Associated Press.

"The labor market ended last year with a bit of a thud. But I think things will get much better this year."

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Americans are saving less now that the crisis is ebbing, and that trend needs to stop, says Martin Feldstein, former chairman of the Council of Economic Advisors. If Americans don't save more and spend less now, consumer spending will eventually suffer once the money is...
Feldstein Consumers Need to Save More,Spend Less
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2011-55-07
Friday, 07 Jan 2011 11:55 AM
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