Tuesday, 07 July, 2020

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Personal Incomes Dip Due to COVID-19

The National Association of Home Builder’s (NAHB) latest Eye on Housing report highlighted recent findings from the Bureau of Economic Analysis (BEA), and that personal income in May fell 4.2% to $19.8 billion.

This comes after personal income rose 10.8% a month prior in April. These findings were centered around the subject of how the pandemic has affected personal income across the nation.

The major factor that the report pointed to as the main culprit pushing this apparently sudden decline is the decrease of government social benefits being provided to citizens. Specifically, the one-time stimulus checks that most Americans received were posted in April—which surely contributed to the positive uptick in income statistics during that month.

Regarding pandemic unemployment insurance, this experienced a rise, increasing by $825.3 billion during the month of May. This sum included Pandemic Unemployment Assistance ($101.5 billion), Pandemic Emergency Unemployment Compensation Payments ($6.3 billion), and Pandemic Unemployment Compensation Payments ($691.9 billion).

The report added that Americans’ real disposable income—the income remaining after adjusting for taxes and inflation—dropped 5% in May following a 13% gain in April.

American’s struggles stemming from May’s dismal numbers regarding personal income were only further compounded by May’s personal consumption expenditures (PCE), which rose a significant amount (by 8.2%) versus April’s decrease (by 12.6%).

This marked disparity in spending was directly attributed by the experts to April’s lockdown measures, which showed the majority of the nation’s businesses shuttered. This only makes sense that in response, American households, while complying with the ‘stay-at-home’ orders, spent far less in April than they otherwise would have. Likewise, once May brought the re-opening of many businesses, Americans were right back at it, jumping on the consumer bandwagon and taking advantage of opportunities to shop and dine out that were not previously available to them in April.

The report revealed that May saw an increase in consumer spending and a marked decrease in personal income, which directly impacted Americans’ personal savings. Specifically, it was revealed that Americans’ personal savings for a rainy day took a huge drop, falling 23.2%. This sad figure is in stark contrast with April’s record high savings rate (32.2%).