How Government Stimulus Kept People Spending

Personal Income and Outlays

The Personal Income and Outlays report for October shows a decline in government stimulus.

Personal Income Synopsis

  • Personal income decreased $130.1 billion (0.7 percent) in October. Disposable personal income (DPI) decreased $134.8 billion (0.8 percent) and personal consumption expenditures (PCE) increased $70.9 billion (0.5 percent).
  • The decrease in personal income in October was led by a decrease in government social benefits. 
  • Within government social benefits, “other” social benefits decreased which primarily reflected a decrease in Lost Wages Supplemental Payments, a Federal Emergency Management Agency program that provides wage assistance to individuals impacted by the pandemic. 
  • Temporary and intermittent decennial Census workers boosted government wages by $3.7 billion in October after adding $9.3 billion in September and $10.9 billion in August. Within farm proprietors’ income, there was an increase in payments under the Coronavirus Food Assistance Program related to supporting farmers and ranchers impacted by COVID-19.

Personal Income in 2020

Personal Income and personal PCTR 2020-11

Personal Current Transfer Receipts

PCTR, the line in green on my chart, consists of Social Security, Medicare, Medicaid, Veterans’ Benefits, Unemployment Insurance, and Other.

The first four vary little month to month so I did not plot them. 

The massive surge in “other” in April was due to $1,200 stimulus checks sent to millions of Americans. The first surge was direct deposit, and the rest was mailed checks over time.

Other also got a boost from Pandemic Unemployment Assistance (PUA), and Pandemic Emergency Unemployment Compensation (PEUC). PUA and PEUC expire on December 26.

Personal Income Minus PCTR

Personal Income minus PCTR is down only $27 billion from where it was before the pandemic hit, but an analysis of winners and losers shows how uneven things are.

Winners and Losers

  • Winners: Millions who worked at home and did not lose their job got $1,200 out of the blue and spent it. 
  • Winners: Millions of others in PUA programs made more being unemployed than they did working. They also got a $1,200 check.
  • Winners: Millions of retirees who were not over the fiscal limits also got $1,200 in free money. 
  • Losers: Everyone who lost their job and the check plus PUA did not cover the loss. There are between 15 and 30 million people in this category. 

Fiscal Cliff Looms

Although Personal Income minus PCTR is about where it was pre-pandemic, PCTR is $637 billion above the pre-pandemic level.

That is approximately the monthly amount that would go away by the end of December.

Already millions are out of work and have exhausted all of their unemployment insurance benefits and all of their PEUC.

A fiscal cliff approaches for the losers. 

For further discussion, please see  No Thanksgiving Cheer for the Unemployed.


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