US personal income shrinks in August

WASHINGTON: U.S. personal income decreased 2.7 percent in August, following the expiration of extra unemployment benefits provided by the federal government, the Labor Department said Thursday.
“Federal economic recovery payments slowed, as pandemic-related assistance programs begin to wind down,” the department’s Bureau of Economic Analysis said in a report.
Compared with a 0.5-percent increase in July, the decrease in August was more than accounted for by a cut in unemployment insurance benefits, particularly the Federal Pandemic Unemployment Compensation program, which provided a temporary weekly supplemental payment of 600 U.S. dollars for those receiving unemployment benefits.
The program, part of a 2-trillion-dollar relief package approved by Congress in late March, expired at the end of July. Two months later, lawmakers remain deadlocked on the next round of coronavirus relief.
After negotiations collapsed in early August, U.S. President Donald Trump signed a series of actions to provide certain COVID-19 economic relief, including one that extends extra unemployment benefits through the end of the year at a reduced level of 400 dollars per week.
The president’s order demands states cover 25 percent of the 400-dollar weekly benefits, despite the fact that states are already in dire financial condition. Some states have started issuing a 300-dollar weekly supplement to unemployment benefits, with assistance money from the federal government.
Partially offsetting the decrease in unemployment insurance benefits in August was an increase in wages and salaries, as well as temporary census hires, according to the Labor Department’s report.
Personal consumption expenditures (PCE), meanwhile, increased 1.0 percent in August, lower than that of 1.5 percent in the previous month.
PCE price index edged up 0.3 percent, up 1.4 percent from a year ago, but still well below the Federal Reserve’s 2-percent target.
“The lapse in the supplements to unemployment insurance hit incomes harder than spending in August, but the place was most disturbing,” Diane Swonk, chief economist at Grant Thornton, a major accounting firm, said in a blog, noting that “food insecurity worsened.”
“This is further evidence that momentum in the economy slowed as we reached the end of the summer,” Swonk said.–Agencies