We are amidst COVID-19, is to state the obvious. We are amidst a terrible economic and financial storm, is the common sentiment. U.S. Government has taken emergency measures like the release of sizeable economic relief and stimulus package, to shore up households and small businesses. Federal Reserve has taken measures, never done before, to inject money and credit in the economy. However, a common person, in the main street, is worried about personal income going down or disappearing.
Personal Income Statistics
The headline statistics released by the U.S. Bureau of Economic Analysis, on May 29, 2020 read as follows:
“Personal income increased $1.97 trillion (10.5 percent) in April according to estimates released today (May 29, 2020) by the Bureau of Economic Analysis (BEA). Disposable personal income (DPI) increased $2.13 trillion (12.9 percent) and personal consumption expenditures (PCE) decreased $1.89 trillion (13.6 percent).”
Personal saving was $6.15 trillion in April and the personal saving rate—personal saving as a percentage of disposable personal income—was 33.0 percent.”
The BEA report, however, added that the increase in personal income in April primarily reflected an increase in government social benefits to persons as payments were made to individuals from federal economic recovery programs in response to the COVID-19 pandemic.
January Vs. April 2020
We decided to undertake a comparison of personal income and savings in a full month (January 2020) before COVID-19 and a full month (April 2020) during COVID-19. The Table below shows the numbers:
The U.S. Bureau of Labor Statistics report, on May 13, 2020, read:
“The unemployment rate in April 2020 increased by 10.3 percentage points to 14.7 percent. This is the highest rate and the largest over-the-month increase in the history of the data (available back to January 1948). The number of unemployed persons rose by 15.9 million to 23.1 million in April.”
Social Benefits and Public Sentiments
Though, statistically speaking, at macro level, social benefits did lift levels of personal income, disposable personal income and personal savings during COVID-19, but the social benefits didn’t lift the mood of the people. The compensation of employees has gone down by 10.24% and the personal consumption expenditure has gone down by 19.42%, from January 2020 to April 2020. The macro numbers may interest policymakers; for homemakers micro numbers matter. The general public sentiments seem a function of jobs and earned income more than social benefits.
Dr Sat Parashar, PhD is a Professor and Financial Services Professional. He may be reached at firstname.lastname@example.org