This is remarkable, given that in recent months the number of Americans with a job remains lower than pre-pandemic levels. In November, total wage and salary income in the United States exceeded its pre-pandemic level. Monthly personal-income data from the Bureau of Economic Analysis show that Americans’ total wage and salary earnings have risen month after month since last spring. On top of the massive government transfers, people’s sky-high additional saving has also drawn on the fact that most Americans’ paychecks kept growing despite the pandemic. So, despite the massive drain on economic demand from over-the-top savings, GDP and total employment nose-dived only during the second quarter of last year, when much of the economy abruptly shut down. Fortunately, both the Trump and Biden administrations managed to get the economics of the pandemic right: The United States averted a sustained economic catastrophe by pumping up people’s incomes with emergency payouts while saving rates were soaring.īy my calculations, Americans who lost their job during the pandemic have received more than $600 billion in added benefits, and the three rounds of government checks put about $900 billion in the pockets of 90 percent of American households, whether their members were unemployed or not, from April 2020 to March 2021. And if it’s the latter, lawmakers should be prepared to finance those expenditures by raising revenues from companies and their investors, whose incomes and consumer spending won’t be significantly affected by new taxes.īecause a dollar saved is a dollar unspent, any sudden, enormous jump in personal savings would normally devastate consumer spending and economic growth. To avoid an anemic recovery like the one that set the stage for Donald Trump’s election in 2016, either personal-saving rates should come down or Congress should approve a lot of additional federal spending to make up for the shortfall. With large unemployment benefits and waves of free cash now starting to recede in the country’s rearview mirror, the continuation of that high level of personal savings threaten a strong expansion into 20.Īnnie Lowrey: Workers should have the power to say ‘no’ The personal-saving rate remains high: 14.9 percent in April and 12.4 percent in May. From March 2020 to April 2021, the personal saving rate averaged 18.7 percent-the highest rate for so long a period since World War II.Īs the pandemic recedes, the economy faces a serious new challenge. From April through June last year, Americans put away an astonishing 25.8 percent of their disposable income, compared with 7.3 percent over the same months in 2019. Facing a real possibility that COVID-19 and the resulting economic havoc might leave them unable to pay their mortgages and feed their families, moderate- and middle-income Americans began saving as much as they could-and are now socking away now perhaps too much to support a healthy expansion for the U.S. Getting the public to pay attention took a pandemic. For two generations, economists and other custodians of financial propriety have chastised Americans for not saving enough.
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