Mel Evans/AP/File
Joe Walls empties a bag of fifty-cent pieces into a bank's coin-counting machine in Fairless Hills, Pa. Households pushed their savings rate to the highest level in more than 15 years in May.
US personal income gets timely help from stimulus
By Laurent Belsie | 06.26.09
The US government’s stimulus is pushing money into Americans’ pocketbooks with gusto.
Just as total wages and salaries in May swooned to their lowest level in nearly two years, Americans got a timely boost from Uncle Sam: a record $2.24 trillion in government benefits (calculated at an annual rate), the Commerce Department reported Friday. Those government transfers, plus the temporary decrease in federal taxes, made disposable income soar 1.6 percent over the previous month. That was the highest monthly increase in a year.
With the extra money, consumers spent an extra 0.3 percent in May, the first monthly rise since February. Amercans’ savings rate rocketed to 6.9 percent, the highest level since 1993.
But without that government help, the picture looks far less robust. Americans’ disposable income rose only 0.2 percent in May – less than the 0.9 percent advance in April (when government stimulus is factored out).
Much of the rise in May’s government spending was temporary, anyway. Since most of the increase in May came from onetime $250 checks to Social Security recipients, the impact of the stimulus will fade going forward.
“As night follows day, incomes will decline in June as the onetime payments drop out, and the saving rate will drop back as well,” wrote Nigel Gault, chief US economist for IHS Global Insight, in an analysis.
Whether that’s good or not depends on the timing of the recovery. If it’s imminent, then a pickup in private-sector salaries will make up for the drop in government spending. If the recovery is delayed, then the next few months will be difficult for the consumer and those businesses that rely on them.
The historical record isn’t reassuring on this point. The last time government payments jumped so fast in a single month was last May, when the Bush administration was sending out stimulus checks to blunt the current recession. It didn’t work.
The last time government payments jumped so quickly over a three-month period, Jimmy Carter was trying to counter the 1980 recession with a package of extended unemployment benefits and retraining and other initiatives. That six-month slump ended, but it was followed a year later by a far more severe 16-month recession, which was the longest postwar contraction in US history.
Until now.
Timing is everything. Will President Obama get it right?
__________
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Comments
2. Margaret | 06.29.09
This is the best laugh I’ve had in ages. You promote this taxpayer stimulus which only adds debt to the people and LOADS of future pain, all the while ignoring the destruction of the real economy that actually generates wealth. Have you decided that people should not be able to support themselves and their families? CSM USED TO BE one of the most honest, agenda-free balanced sources for news in the world. Now you’re a fabulous propaganda machine for the demise of freedom and an adequate living for people. I’m sorry to lose a formerly trusted friend. No kidding.
3. anai | 06.29.09
What stimulus money. I agree best laugh since the obama administration took over. Most of us have been crying over the idiots. Expensive parties, $100 a pound steaks, over 200,000 hundred spent for a weekend to please his wife. forgot the expensive trips to Europe , time wife and children spent in England while most people in country are wondering how to pay for food, gas, and heating loss of employment I agree with above I always thought at one time you were conservative but times have changed. How would the founder of the church and newspaper react if she was alive.Forgot to mention The SF trip etc , etc etc. and people complained when Bush would fly to his home.
Now the Cap and Trade and EPA sending notice no longer global warming which obama decides to not announce. I can go on , on and on but no need to bother since you are a follower.
4. william deane | 06.29.09
thanks for a very fair report. fact is the stimulous plan is working. fact is the monitor is not saying the stimulous plan will have any lasting effect and gives evidence from history that it will not. too bad margaret injects her personal feelings in criticizing the monitor’s ever watchful effort of fairness and truth. “no kidding,” margaret
5. betty | 07.09.09
my employer took away a $40,000 a year salary plus commissions to straight commissions and i had to resign. now i can’t get stimulus help on cobra because i wasn’t (fired)!!!! commissions are ok if the economy was strong.
why is the help always for someone else?
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1. Ann Tollette | 06.28.09
But when is the average citizen supposed to get his/her stimulous check? Everyone who filed income taxes was supposed to get a check~supposedly starting the last of May~not just people on Social Security!