Incomes rose in April, but only because of government relief payments
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Some startling numbers from the Bureau of Economic Analysis were released Friday showing personal income rose by 10.5% in April.
Also, last month about 20 million people in the U.S. lost their jobs as the coronavirus pandemic hit many businesses. But people still had more money in their pockets than a month earlier.
At the end of every month, the federal government adds up all of the money we’ve made that month from wages, interest, dividends and even government benefits. Then the Bureau of Economic Analysis spits out the personal income number, showing how much income went up or down. It doesn’t usually make headlines. But the April number made economists’ jaws drop.
“It tells us this is a very weird moment,” said Jason Furman, a Harvard economist and former chair of the Council of Economic Advisers. He said incomes went up last month because of the $1,200 relief checks most U.S. adults are getting. Plus, the government tacked an extra $600 a week onto unemployment payments.
“The government has protected people’s incomes from the large decline that otherwise would have been caused by the economy,” Furman said.
U.S. workers have filed more than 40 million unemployment claims since the coronavirus pandemic hit. Furman said government benefit payments rose in April by a whopping 90%. Ann Owen, an economist at Hamilton College, said without the government help, the April personal income number falls a lot.
“Income for the month of April would have gone down substantially,” she said. “Instead of being up 10%, we would have been down roughly 5%.”
Most of the relief checks have already been sent out. So what will personal income look like for May? Ernie Tedeschi, policy economist at Evercore ISI, said the personal income number for this month will probably make headlines again because it will drop.
“Because these stimulus payments are one-time, and after they’re sent out, they go away,” Tedeschi said. “It’s not clear if Congress is going to do another round at all, but we’re at the end of May. We know that there’s not going to be another round in May.”
Tedeschi said the government will keep adding the $600 to weekly unemployment payments, but that’s set to expire at the end of July.
COVID-19 Economy FAQs
What do vaccines mean for economic recovery?
COVID-19 is not going anywhere anytime soon, according to expert witnesses who testified at a recent hearing held by the Joint Economic Committee. Put simply, we can’t eradicate the virus because it infects other species, and there will also be folks who choose not to get the vaccine or don’t mount an immune response, according to Dr. Céline Gounder at NYU School of Medicine & Bellevue Hospital. “That means we can’t only rely on vaccination,” Gounder said. She said the four phases of recovering from the pandemic are ending the emergency, relaxing mitigation measures, getting to herd immunity and having long-term control.
Can businesses deny you entry if you don’t have a vaccine passport?
As more Americans get vaccinated against COVID-19 and the economy begins reopening, some businesses are requiring proof of vaccination to enter their premises. The concept of a vaccine passport has raised ethical questions about data privacy and potential discrimination against the unvaccinated. However, legal experts say businesses have the right to deny entrance to those who can’t show proof.
What do I need to know about tax season this year?
Glad you asked! We have a whole separate FAQ section on that. Some quick hits: The deadline has been extended from April 15 to May 17 for individuals. Also, millions of people received unemployment benefits in 2020 — up to $10,200 of which will now be tax-free for those with an adjusted gross income of less than $150,000. And, for those who filed before the American Rescue Plan passed, simply put, you do not need to file an amended return at the moment. Find answers to the rest of your questions here.
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