Will Americans become big personal savers again?

Americans are becoming savers again. After letting their personal savings rate fall to near zero, consumers over the past year have averaged a nearly 4 percent rate -- back to levels not seen since 1999.

What these born-again savers do next will set the tone for the recovery and the post-recession economy. For a hint of what's going to happen, take a good long look in the mirror.

Some economists think you'll keep boosting your savings to about 8 percent of after-tax personal income, a level not seen since the 1980s. They say the financial panic, the long recession and perhaps even the urging of President Obama have convinced you that you need to set aside more money.

That would slow the recovery because consumers who are saving more are, all other things being equal, spending less. The long-term effects, however, are beneficial because American businesses would have a bigger pool of savings to borrow from when they expand -- and their interest payments would go to American creditors instead of foreign ones.

If Americans return to their fiscally freewheeling ways, then retailers would see a stronger initial uptick in sales, but the recovery would not lead to any long-term benefits from better savings habits.

The evidence of what's happened so far is mixed. The savings rate has rebounded since flirting with zero earlier in the decade (or going negative, depending on which measure you use).

Savings will continue heading up, perhaps to 8 percent or beyond, some economists say.

"I am unprepared to make numeric predictions without working out some solid numbers, but this sounds right," writes Jonathan Parker, a finance professor at Northwestern University, in an e-mail. "Why? First, to close the trade gap in normal times (in an accounting sense) would require a saving rate of around 8 percent. Second, more typical saving rates in the US historically are around 8 percent."

But in August, the personal savings rate fell for the third month in a row to 3 percent of disposable income, the Commerce Department reported Oct. 1. The monthly numbers can jump around a good bit, economists warn: Perhaps consumers were temporarily lured out of savings mode by the "cash for clunkers" program, for example.

Or maybe, seeing their stock portfolios expand again after their precipitous decline, Americans felt less need to stash away more money. That's typical, says Milton Marquis, an economist at Florida State University, whose research suggests that the typical household saves less when stocks and real estate values are rising. That trend would explain the zero-saving during the recent real estate bubble, the dramatic rise in personal savings early this year when housing and stock values plummeted, and then the moderation in savings as stock prices rose from multiyear lows.

It also suggests Americans will not return to an 8 percent savings rate anytime soon, Mr. Marquis says. "I'd be shocked at that number.... We live in a different world than we did back then. Credit is so much more available now."

Of course, no one really knows which direction Americans will take.

"It's a cultural thing," says Alice Rivlin, an economist at the Brookings Institution. "Has this generation of consumers been through such a traumatic experience that they will be more cautious for the rest of their lives -- and maybe their children will become more cautious?"

Every American has an answer to that question. It offers some insight into where the economy is headed next. Have your savings habits changed permanently?
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