Personal income increased 10% from December 2020 to January 2021, largely thanks to the government’s stimulus benefits, according to a new analysis by the United States Bureau of Economic Analysis (BEA).
The Covid-December 19, 2020 relief bill provided $ 600 stimulus payments to many individuals and extended key federal unemployment benefits. The BEA considers that these two social benefits “more than explain” the increase in income in January.
Many Americans put some of that extra income to good use immediately: consumer spending increased 2.4% in January, with about $ 277.2 billion more going to durable goods like vehicles and food, and about US $ 63.7 billion more going to services like food outside the home.
Many have also saved some of its benefits. The personal savings rate rose to 20.5% in January, from 13.4% in the previous month. Americans now have an estimated savings of $ 3.9 trillion – up from $ 1.38 trillion in February 2020.
The report does not explain how the increase in savings and spending is distributed among different levels of income or families, or among those who are employed or Unemployed. While many Americans are still struggling to pay their bills amid the ongoing pandemic-induced economic crisis, many others have kept their jobs and managed to save their stimulus payments. The savings rate is high, but not uniformly.
The discoveries were made while Congress was drafting the next Covid-19 relief bill. Passed by the House on Friday, the bill will include another round of stimulus checks for many families, as well as an extension of the main federal unemployment benefits.
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