COVID-19

Personal incomes are up, but it won’t last

Kimberly Adams Aug 28, 2020
Heard on: Marketplace
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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-19

Personal incomes are up, but it won’t last

Kimberly Adams Aug 28, 2020
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
HTML EMBED:
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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

Are people still waiting for unemployment payments?

Yes. There is no way to know exactly how many people have been waiting for months and are still not getting unemployment, because states do not have a good system in place for tracking that kind of data, according to Andrew Stettner of The Century Foundation. But by his own calculations, only about 60% of people who have applied for benefits are currently receiving them. That means there are millions still waiting. Read more here on what they are doing about it.

Are we going to see another wave of grocery store shortages?

Well, public health officials are warning that we could see a second wave of the virus before the end of the year. And this time retailers want to be prepared if there’s high demand for certain products. But they can’t rely totally on predictive modeling. People’s shopping habits have ebbed and flowed depending on the state of COVID-19 cases or lockdowns. So, grocers are going to have to trust their guts.

What’s going to happen to retailers, especially with the holiday shopping season approaching?

A report out Tuesday from the accounting consultancy BDO USA said 29 big retailers filed for bankruptcy protection through August. And if bankruptcies continue at that pace, the number could rival the bankruptcies of 2010, after the Great Recession. For retailers, the last three months of this year will be even more critical than usual for their survival as they look for some hope around the holidays.

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