The U.S. economy has remained resilient in recent years as consumers spent their COVID-19 pandemic savings, but that financial cushion has worn thin and is no longer able to play a key role in propping it up, economists say.

The Federal Reserve Bank of San Francisco estimated in May that pandemic savings in America peaked at $2.1 trillion in August 2021 as consumers stayed home and received government stimulus, but that savings dwindled over the past 2.5 years,  San Francisco Fed economists Hamza Abdelrahman and Luiz Oliveira said.

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“As of March 2024, our estimate shows that overall excess savings in the U.S. economy have been fully depleted,” they wrote in a blog.

As a result, delinquencies are rising as U.S. household debt has reached a record and more Americans are falling behind on their credit card payments, according to data from the New York Fed, Bloomberg reported.

A third of households in a recent Census Bureau survey reported it was difficult to pay for usual household expenses as the savings rate has fallen.

"That excess cushion that households were able to fall back on in the immediate aftermath of the pandemic is no longer available for the most part," Stephen Stanley, chief U.S. economist at Santander US Capital Markets, told Bloomberg.

“And so their fortunes are basically tied to their current income, which is inevitably a function of the labor market," Stanley noted.

Employers added 272,000 jobs in May, but the pace of hiring has cooled, and the unemployment rate has crept up, according to Bloomberg.

For now, the labor market is keeping consumers afloat and allowing the Fed to keep interest rates between 5.25% and 5.50% as it tries to get the rate of inflation down to 2%.

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The image was created with artificial intelligence MidJourney.