The Mysterious Drop in the Saving Rate

The NYT told readers that the saving rate has fallen sharply in recent months, registering just 3.6 percent in September, down from rates of more than 5.0 percent earlier in the year. (In the pre-bubble era, the saving rate averaged more than 8.0 percent.)

The main reason for this decline was likely erratic income data. There are often erratic movements in these numbers that cannot be explained by actual developments in the economy. In the four months from January to May, a period in which...