Goldman Flags 0.6% Real Income Drop and 2.6% Personal Savings Rate
GS•Goldman Sachs economists found real personal income per worker, net of transfers and inflation, fell 0.6% year-over-year—a pace seldom seen outside recessions. They warn that record-low 2.6% personal savings rate and expiring tax-refund cushion could strain consumer spending, especially among lower-income households.
1. Research Note Findings
Goldman Sachs economists Manuel Abecasis and Joseph Briggs report that real personal income per worker, excluding government transfers and adjusted for inflation, declined 0.6% year-over-year—a pace rarely seen outside recessions.
2. Drivers of Real Income Erosion
The income squeeze reflects higher tariffs raising goods costs, elevated energy prices, and wage growth failing to keep pace with inflation, offsetting gains from a resilient labor market.
3. Consumer Spending Outlook
Tax refunds from recent tax cuts temporarily bolstered cash reserves while the personal savings rate plunged to 2.6% in April, but this cushion is expected to deplete, heightening risk of a spending slowdown, particularly for lower-income households.
