Nobody can agree how much savings Americans have left

The primary macroeconomic debate of 2023 has coalesced around a deceptively simple question: how much money do American households have left in their pandemic savings accounts? The answer depends entirely on which econometric model an analyst chooses to consult. While the Federal Reserve Bank of San Francisco published a widely cited paper estimating that roughly $500 billion of the original $2.1 trillion excess savings cushion remains intact—projecting complete depletion by late summer—other Wall Street research teams argue that households still retain over $1 trillion in accumulated surplus liquidity. This enormous statistical dispersion is not an academic curiosity; it is the critical unknown variable dictating the longevity of the consumer spending cycle.

The root of this econometric disagreement lies in the fundamental sensitivity of "excess savings" models to counterfactual baseline assumptions. Excess savings cannot be directly observed on a bank statement; it is a calculated residual, defined as the difference between actual savings and the counterfactual savings path households would have followed had the pandemic never occurred.

The Counterfactual Trap

If an economist assumes that household savings would have continued compounding at the robust 2018–2019 pre-pandemic savings rate of 7.5 per cent, actual current savings appear severely depressed, indicating that excess savings are virtually exhausted.

If, however, an analyst uses a longer historical trend or adjusts for higher nominal income trajectories, the calculated surplus remains substantial. Furthermore, aggregate savings models are utterly blind to distribution. The vast majority of remaining liquid cash is held by top-quintile households who treat it as permanent wealth rather than discretionary spending capital.

The Approaching Reality Check

For the bottom sixty per cent of income earners, the pandemic cushion has been entirely vaporized, replaced by soaring credit card balances and double-digit auto loan delinquencies.

Relying on aggregate savings figures to predict broad consumer resilience is an exercise in statistical self-delusion. Nobody can agree on how much excess savings remain because the metric is an econometric fiction; for the vast majority of consumers, the liquid buffer is already gone, leaving consumer spending directly exposed to the coming labour market slowdown.