Stimulus & additional UI dried up. But 16% of “proprietors’ income” in October was PPP cash & Pandemic farm help.

By Wolf Richter for WOLF STREET.

Consumers are working low on synthetic steam – which means stimulus cash, additional unemployment advantages, cash from rents-not-paid and from mortgage-payments-not-made, although they nonetheless get quite a bit of cash from cash-out mortgage refis at traditionally low rates of interest. And customers are nonetheless spending document quantities on sturdy items, quite a bit of them imported, however in the reduction of on nondurable items. And spending on companies – aircraft tickets, resorts, healthcare, hire, and so on. – are nonetheless deep in the gap.

Personal revenue.

Personal revenue from all sources in October ticked down 0.7% from September, to a seasonally adjusted annual charge of $19.7 trillion, in response to the Bureau of Economic Analysis in the present day. It was down 6.9% from its fabulous stimulus-and-unemployment-money-induced spike in April. But it’s nonetheless up 5.5% from a yr in the past, which makes this, throughout the Pandemic when over 20 million persons are nonetheless claiming state or federal unemployment advantages, the Weirdest Economy Ever:

The private revenue and spending numbers launched by the BEA are “annual rates,” a hypothetical concoction that extrapolates the quantity of the present month out to a whole yr, primarily multiplying the present month determine by 12. So no, customers didn’t make $19.7 trillion in October. That was the “annual rate.” And it was seasonally adjusted too. To illustrate: the precise private revenue in all of 2019 was $18.5 trillion, or $1.54 trillion on common monthly.

Free Pandemic Money Runs Low.

Income from unemployment insurance coverage (UI) had skyrocketed from an annual charge of $28 billion acquired by customers in February to an annual charge of $1.40 trillion in June, fired up by the additional $600-a-week in federal unemployment advantages, which expired at the finish of July. While backlogs noticed to it that funds have been nonetheless being processed in the following months, the quantities of UI acquired started to plunge. And in October, it fell to $306 billion (annual charge), the lowest since March.

Stimulus & welfare funds – the $1,200 per grownup and $500 per youngster – began arriving in financial institution accounts in April. The BEA provides these stimulus funds to the common and pretty regular welfare and different authorities funds (for brief, “welfare payments”). Those welfare funds amounted to $506 billion (annual charge) in February, earlier than there was any stimulus. Then in April, stimulus funds of $2.86 trillion (annual charge) flooded shopper financial institution accounts, and mixed with welfare funds amounted to $3.38 trillion (annual charge).

By October, most of the stimulus funds had dried up (deadline had been prolonged to November 21 for the stragglers the IRS has a tough time discovering). And the welfare and stimulus funds dropped to $732 billion (annual charge).

UI, stimulus, and welfare mixed, after spiking to an annual charge of $3.88 trillion in April, fell to $1.04 trillion in October:

Consumers are working low on synthetic steam – which means stimulus cash, additional unemployment advantages, cash from rents-not-paid and from mortgage-payments-not-made, although they nonetheless get quite a bit of cash from cash-out mortgage refis at traditionally low rates of interest. And customers are nonetheless spending document quantities on sturdy items, quite a bit of them imported, however in the reduction of on nondurable items. And spending on companies – aircraft tickets, resorts, healthcare, hire, and so on. – are nonetheless deep in the gap.

Money from wages and salaries.

Personal revenue from wages and salaries, together with from self-employment actions, rose 0.7% in October from September to an annual charge of $9.58 trillion. This was nonetheless down 0.9% from February, the final month of the Good Times, nevertheless it was up 2.1% from a yr in the past. This is revenue “in aggregate,” all added collectively, together with these at the high of the revenue scale with multi-million-dollar will increase in annual incomes:

Consumers are working low on synthetic steam – which means stimulus cash, additional unemployment advantages, cash from rents-not-paid and from mortgage-payments-not-made, although they nonetheless get quite a bit of cash from cash-out mortgage refis at traditionally low rates of interest. And customers are nonetheless spending document quantities on sturdy items, quite a bit of them imported, however in the reduction of on nondurable items. And spending on companies – aircraft tickets, resorts, healthcare, hire, and so on. – are nonetheless deep in the gap.

The chart beneath reveals by how a lot the stimulus and additional unemployment advantages overshot the drop in revenue from wages and salaries, which is partially what triggered the Weirdest Economy Ever:

Consumers are working low on synthetic steam – which means stimulus cash, additional unemployment advantages, cash from rents-not-paid and from mortgage-payments-not-made, although they nonetheless get quite a bit of cash from cash-out mortgage refis at traditionally low rates of interest. And customers are nonetheless spending document quantities on sturdy items, quite a bit of them imported, however in the reduction of on nondurable items. And spending on companies – aircraft tickets, resorts, healthcare, hire, and so on. – are nonetheless deep in the gap.

Personal revenue from different sources, October v. the Good-Times February:

Proprietors’ revenue (farm and nonfarm) rose by 17.5% from February, to $1.92 trillion (annual charge). This contains, you guessed it…

Free Pandemic-money for proprietors: $302 billion (annual charge) of proprietors’ revenue in October, or almost 16% of complete proprietors’ revenue, was offered by Pandemic help applications:

  • “Coronavirus Food Assistance Program” for farms added $93 billion (annual charge)
  • “Paycheck Protection Program loans” (PPP) for farms added $6.3 billion (annual charge)
  • PPP for nonfarms added $203 billion (annual charge).

Supplements to wages and salaries – employer contributions to worker advantages, pensions, and social insurance coverage – at $2.15 trillion (annual charge) are down simply 0.6% from February.

Interest and dividend revenue fell by 3.6% from February – due to the Fed’s rate of interest repression and company dividend cuts – to $2.88 trillion (annual charge).

Rental revenue rose by 2.0% from February to $818 billion (annual charge).

Government switch funds by way of Social Security, Medicare, Medicaid, and Veterans’ advantages rose 5.0% from February to $2.76 trillion (annual charge).

Medicare and Medicaid funds are counted in private revenue as a result of people are the beneficiaries although healthcare suppliers acquired the funds. The sharp improve in these two and in the funds to Veterans are at the very least partially a operate of the prices of treating Covid sufferers:

  • 2.4% improve in Social Security advantages (to $1.09 trillion annual charge)
  • 6.1% improve in Medicare funds (to $854 billion annual charge, paid to suppliers)
  • 7.7% soar in Medicaid funds (to $669 billion annual charge paid to suppliers)
  • 6.2% soar in Veterans’ advantages (to $147 billion annual charge).

Where did customers spend this moolah?

Consumers nonetheless went nuts over sturdy items, however in the reduction of on nondurable items and continued to scrimp on the biggie, companies.

Total shopper spending in October ticked up 0.5% from September to $14.64 trillion (annual charge), however was nonetheless down 1.6% from Good-Times February and down 0.6% from a yr in the past:

Consumers are working low on synthetic steam – which means stimulus cash, additional unemployment advantages, cash from rents-not-paid and from mortgage-payments-not-made, although they nonetheless get quite a bit of cash from cash-out mortgage refis at traditionally low rates of interest. And customers are nonetheless spending document quantities on sturdy items, quite a bit of them imported, however in the reduction of on nondurable items. And spending on companies – aircraft tickets, resorts, healthcare, hire, and so on. – are nonetheless deep in the gap.

None of the spending knowledge is adjusted for inflation, and in some classes there have been huge worth will increase, together with historic 15% worth improve for used automobiles over the three-month interval July, August, and September.

Spending on sturdy items added a tad to the loopy spike – many of these merchandise are imported from China, Germany, Japan, Mexico, and so on., and so they’re all very grateful for the stimulus – as customers are splurging on laptops, different digital units, costly automobiles, furnishings, home equipment, and the like.

But the improve in October, +0.6% from September, was the smallest month-to-month improve since April. At $1.79 trillion (annual charge), spending was up by 15% from Good-Times February and from a yr in the past:

Consumers are working low on synthetic steam – which means stimulus cash, additional unemployment advantages, cash from rents-not-paid and from mortgage-payments-not-made, although they nonetheless get quite a bit of cash from cash-out mortgage refis at traditionally low rates of interest. And customers are nonetheless spending document quantities on sturdy items, quite a bit of them imported, however in the reduction of on nondurable items. And spending on companies – aircraft tickets, resorts, healthcare, hire, and so on. – are nonetheless deep in the gap.

Spending on nondurable items ticked down by 0.3% in October from September, to $3.14 trillion (annual charge), the first month-to-month decline since April, however was nonetheless up 4.0% from February and 4.2% from a yr in the past:

Consumers are working low on synthetic steam – which means stimulus cash, additional unemployment advantages, cash from rents-not-paid and from mortgage-payments-not-made, although they nonetheless get quite a bit of cash from cash-out mortgage refis at traditionally low rates of interest. And customers are nonetheless spending document quantities on sturdy items, quite a bit of them imported, however in the reduction of on nondurable items. And spending on companies – aircraft tickets, resorts, healthcare, hire, and so on. – are nonetheless deep in the gap.

And the biggie, spending on companies – which embody rents (so if extra folks than regular don’t make their hire funds…), healthcare, insurance coverage, airplane tickets, lodging, haircuts, broadband and cellphone subscriptions, utilities, and so on., accounting for about two-thirds of complete shopper spending – inched up a mere 0.7% in October from September, to $9.72 trillion (annual charge), the smallest improve since April, and stay 5.8% beneath February and 4.4% beneath a yr in the past:

Consumers are working low on synthetic steam – which means stimulus cash, additional unemployment advantages, cash from rents-not-paid and from mortgage-payments-not-made, although they nonetheless get quite a bit of cash from cash-out mortgage refis at traditionally low rates of interest. And customers are nonetheless spending document quantities on sturdy items, quite a bit of them imported, however in the reduction of on nondurable items. And spending on companies – aircraft tickets, resorts, healthcare, hire, and so on. – are nonetheless deep in the gap.

The shift from enterprise spending to shopper spending.

Work-from-home and distant studying have had a big effect on shopper spending. Households upgraded their houses to accommodate the new work and research regime. They purchased laptops like by no means earlier than, they purchased different digital units and community gear. They purchased desks and chairs and lamps. These have been one-time expenditures to get arrange, and so they’re beginning to fade out.

And they’re ingesting espresso at residence as a substitute of ingesting the free stuff at the workplace, and so they’re consuming at residence as a substitute of at the free cafeteria at work. They’re shopping for bathroom paper and paper towels and snacks. And they’re utilizing electrical energy at residence all day. And on and on.

These outlays shifted spending from workplaces to households. In different phrases, some of the spending that used to point out up below consumption by companies is now exhibiting up below consumption by households. This half of shopper spending doesn’t really advert to the financial system. It simply shifts the cash circulation.

Credit-score algos acquired fooled by forbearance. Weirdest financial system ever the place nobody is aware of what’s occurring anymore. Read…  No Payment, No Problem: In Rosy World of Forbearance, Official Delinquencies Plunge, Credit Scores of Delinquent Borrowers Jump

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Consumers are working low on synthetic steam – which means stimulus cash, additional unemployment advantages, cash from rents-not-paid and from mortgage-payments-not-made, although they nonetheless get quite a bit of cash from cash-out mortgage refis at traditionally low rates of interest. And customers are nonetheless spending document quantities on sturdy items, quite a bit of them imported, however in the reduction of on nondurable items. And spending on companies – aircraft tickets, resorts, healthcare, hire, and so on. – are nonetheless deep in the gap.

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Consumers are working low on synthetic steam – which means stimulus cash, additional unemployment advantages, cash from rents-not-paid and from mortgage-payments-not-made, although they nonetheless get quite a bit of cash from cash-out mortgage refis at traditionally low rates of interest. And customers are nonetheless spending document quantities on sturdy items, quite a bit of them imported, however in the reduction of on nondurable items. And spending on companies – aircraft tickets, resorts, healthcare, hire, and so on. – are nonetheless deep in the gap.