Lee Schafer
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Since the last recession ended in 2009, Americans have generally saved about 5% of what they made.

That held up until March, when the savings rate shot up to 13%. Then on Friday morning April’s savings rate was reported, and it had zoomed to 33%.

If that seems strange, Americans saving one-third of their incomes, that’s because it is. Nothing like this has happened before.

Could this be a good thing? More old-fashioned thriftiness when times are hard?

No, it’s not.

One person’s spending is somebody else’s income. Nothing about a savings rate of 33% should be comforting.

The story of the pandemic recession of 2020 is usually told as one of horrific job losses and lost income for business owners. But the other worrisome part of this story is that even people with money may not want to spend it. How long this goes on will largely shape the economic recovery.

It was a terrible week here in the Twin Cities, beginning with the shocking death of George Floyd in Minneapolis. This article is being written with the smell of smoke from burned-out buildings in the air. Given all that, it was hard to look at yet another extraordinary report on the economy in hopes of finding a glimmer of optimism.

But after a read-through of Friday’s numbers on spending and saving, it’s difficult to see how a quick rebound in consumer spending can happen.

It’s understandable that spending might have slowed in April, of course, as there were no Twins games to attend or leisurely nights out at a favorite casual restaurant. Lots of things were closed, as the COVID-19 pandemic kept people home, either by government order or their own choice.

Spending by consumers really matters, of course, as nearly 70 cents of every dollar in gross domestic product is consumption spending.

As for the numbers, consumption spending in April was down more than 13% from March and more like 20% from February. Spending declined in April more or less across the board, everything from money spent on long-lasting items to spending on services. Even interest expense was down, which makes sense if people are not using their credit cards as much.

Incomes in April actually increased, however, but that’s just another really weird aspect about the world we are living in right now. It was not due to big boosts in worker pay or business profits, as both declined sharply from the pre-pandemic levels of February.

What increased were government benefits, including surging unemployment insurance payments and a whopping increase on a line on a Department of Commerce chart simply labeled “other,” capturing the individual federal stimulus payments. There could be more than one federal stimulus check, but no one in my family is counting on it.

That’s part of the problem, because if people don’t expect another check they might try to save more of the one they just got.

If incomes look shaky out into the future, and for a lot of people they must here in May 2020, then one thing to do is adjust spending down now. People, after all, aren’t really in a position to quickly move to a smaller house or sell a car if future prospects suddenly don’t look so rosy.

Rather they want to keep household spending close to what it had been. One way to do that if incomes seem to be at risk is to cut back some on spending right now and start putting more money away.

This reality has been reflected in consumer confidence surveys, including the well-known one by the University of Michigan. The last one reported that confidence in future expectations declined further from the April survey, even though the first steps toward more shopping and other activity were being taken in Minnesota and elsewhere.

“The CARES relief checks and higher unemployment payments have helped to stem economic hardship,” the principal author was quoted saying in the most recent release. “But those programs have not acted to stimulate discretionary spending due to uncertainty about the future course of the pandemic.”

It’s hard to imagine that spending can keep declining, and the Wall Street Journal last week cited an uptick in automobile sales in its coverage of the start of a recovery. Car sales did bounce back from a shocking collapse at the end March, yet as of the latest report in May, sales were still running about 25% below the previous forecast for the year.

Meanwhile, the stock market has recovered strongly from March. While this is just another thing that seems hard to easily understand, there is a good explanation.

The value of any business, including the 30 that have their stocks included in the famous Dow Jones industrial average, comes from how much money they will make in the future, not what happened in April.

Without being a stock market guru, we intuitively know that eventually consumers will stop stashing away so much money and get back to spending at least close to what they were before the pandemic. That will generate profits for businesses and let them hire more people.

What no one yet knows is if that will be later this year or next year — or even the year after that.

lee.schafer@startribune.com 612-673-4302