The Financial Express

US personal income decreases 2.7pc in August

| Updated: October 03, 2020 11:57:30

File photo used for representational purpose. File photo used for representational purpose.

US personal income decreased 2.7 per cent 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-per cent 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 programme, which provided a temporary weekly supplemental payment of 600 US dollars for those receiving unemployment benefits.

The programme, 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, reports Xinhua.

After negotiations collapsed in early August, US 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 per cent 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 per cent in August, lower than that of 1.5 per cent in the previous month.

PCE price index edged up 0.3 per cent, up 1.4 per cent from a year ago, but still well below the Federal Reserve's 2-per cent 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.

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