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COVID & Unemployment

Personal incomes are up, but it won’t last

Kimberly Adams Aug 28, 2020
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An activist in Las Vegas tapes a sign to her car in support of extending the $600 weekly unemployment benefit, which expired at the end of July. Bridget Bennett/AFP via Getty Images
COVID & Unemployment

Personal incomes are up, but it won’t last

Kimberly Adams Aug 28, 2020
Heard on:
An activist in Las Vegas tapes a sign to her car in support of extending the $600 weekly unemployment benefit, which expired at the end of July. Bridget Bennett/AFP via Getty Images
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COPY

We got another snapshot of what the recovery looks like Friday in data from the Bureau of Economic Analysis over at the Commerce Department: Personal spending is up 1.9%. Also up unexpectedly, personal incomes — up about four-tenths of a percent.

But keep in mind, these numbers are from July, at the end of which the extra $600 a week in unemployment insurance ran out.

According to the Commerce Department, that increase in personal incomes is a sign that more of the economy is starting to reopen.

Daniel Keum, an assistant professor of management at Columbia Business School, points out that personal income has two components. 

“One is the salary people receive from working. The other one is the social insurance programs, and that part is actually going down,” he said.

In other words, less money in unemployment benefits. We’ll see the full impact of that when August numbers come out. Keum said people who relied on that extra money to pay their bills will feel it, and business owners will, too.

“The expiration of the social insurance programs and UI provides them with sort of a demarcation line. OK, this is a good time for me to actually open my business back up and call people back,” he said.

Some recipients will be getting extra benefits again soon by way of funds President Donald Trump is diverting from disaster relief. Veronique de Rugy, senior research fellow at the Mercatus Center, said people in dozens of states are likely to get that extra $300 per week. A few states are already sending out bigger checks

“Effectively what it means is for unemployed people who were counting on it, it’s just basically a reduction of half of the bonus part, which is not half of the benefits,” de Rugy said. “But so for them, it’s going to make a difference.”

For as long as that money lasts, analysts say that might only be a few weeks.

COVID-19 Economy FAQs

What’s the outlook for vaccine supply?

Chief executives of America’s COVID-19 vaccine makers promised in congressional testimony to deliver the doses promised to the U.S. government by summer. The projections of confidence come after months of supply chain challenges and companies falling short of year-end projections for 2020. What changed? In part, drugmakers that normally compete are now actually helping one another. This has helped solve several supply chain issues, but not all of them.

How has the pandemic changed scientific research?

Over the past year, while some scientists turned their attention to COVID-19 and creating vaccines to fight it, most others had to pause their research — and re-imagine how to do it. Social distancing, limited lab capacity — “It’s less fun, I have to say. Like, for me the big part of the science is discussing the science with other people, getting excited about projects,” said Isabella Rauch, an immunologist at Oregon Health & Science University in Portland. Funding is also a big question for many.

What happened to all of the hazard pay essential workers were getting at the beginning of the pandemic?

Almost a year ago, when the pandemic began, essential workers were hailed as heroes. Back then, many companies gave hazard pay, an extra $2 or so per hour, for coming in to work. That quietly went away for most of them last summer. Without federal action, it’s mostly been up to local governments to create programs and mandates. They’ve helped compensate front-line workers, but they haven’t been perfect. “The solutions are small. They’re piecemeal,” said Molly Kinder at the Brookings Institution’s Metropolitan Policy Program. “You’re seeing these innovative pop-ups because we have failed overall to do something systematically.”

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