Under the radar: U.S. savings rate rises to 5.7%, a 14-year high

The U.S. savings rate rose to a 5.7% annualized rate in April, according to U.S Commerce Department data, after almost five years in which the nation did not save a dime -- the nation actually spent more than it had in the 2002-2007 period. Moreover, Americans had saved less than 10% of their income for about two decades.

Sudden savers

What's driving the higher savings rate? Several factors. First, the recession and concerns that the economy may worsen still (or at least not recover as anticipated later this year) are prompting many Americans to increase their safety cushion. Second, Americans' nest eggs in general have been depleted by the 2008-2009 stock market decline, housing sector recession, and by stagnant incomes for many job classifications.

The economic implications of the higher savings rate? There's an upside and a downside. The benefits include greater capital available for investment -- something the U.S. really needs -- as well more Americans better-equipped to deal with future needs/goals. As a nation, the United States really needs to, and can benefit from, saving more: the nation once saved more than 10% of its income (that last occurred in the 1970s), and a high savings rate definitely is one sign of an advanced economy that can live within its means.

The downside? At least short-term, that higher savings rate means the commerce that's dependent on consumer spending -- like retail stores, restaurants, even some entertainment venues and night clubs -- will likely contract: there simply will be fewer dollars to go around. The nation's malls have already experienced a sizable downturn in traffic and revenue: don't look for the mall trend to reverse any time soon. Hotels and other resorts are likely to be hit hard, as well, especially if they're dependent on discretionary spending/leisure dollars.

And, by extension, employment in these sectors -- particularly retail and restaurants -- has fallen and will likely continue to fall. Employees and managers in these sectors will have to be retrained to meet the needs of the restructured U.S. economy: today's ex-clothing store attendant or restaurant chain waiter may be tomorrow's health care worker or solar panel/solar heating installation specialist.

Will there be enough jobs created in the restructured U.S. economy? It's too soon to tell. But one thing is certain: the U.S.'s higher savings rate guarantees that there will be fewer dollars spent on discretionary purchases in the immediate years ahead.