Surprise jump in personal income highlights the issue
How much should someone earn who is laid off due to COVID-19?
You can certainly make the case they should be made whole and that was the idea of the CARES Act. It took the regular $370 weekly US unemployment benefit and added $600 to get to the average US wage of $970/week.
The thing is, it wasn't the average worker that was laid off. White collar workers largely kept their jobs while many of those in food services and some other low-paid jobs went on unemployment.
FiveThirtyEight yesterday had an enlightening report showing that the boost means some hard-hit fields have received a big pay boost. Some small differences were inevitable but +150% is a real disincentive to get back to work.
The shocker in today's PCE report was that personal incomes rose 10.5% compared to a 6.0% decline expected so expect more talk about this in the days ahead. These numbers may be propping up the economy and consumer spending more than anticipated.
None of this was completely unknown. Some Congressmen grandstanded on this very point when the legislation was delivered but few economists saw just how stark the divergence would be.
The next issue is that the extra money runs out on July 31 but the virus won't be gone by then. It doesn't appear that Congress has the will to extend it and if they do, I'm confident they will scale it back. What happens to spending then?
