Nationally, government assistance and unemployment insurance have largely offset decline in employee compensation.

The Washington Research Council has analyzed national savings and personal income data. The analysis helps explain why states, including Washington, are seeing revenue collections coming in above early pandemic forecasts.

WRC economist Kriss Sjoblom has prepared two charts. The first examines personal income. He writes,

I have broken personal income into four parts: employee compensation (wages and salaries, and supplements); unemployment insurance benefits; other government social benefits (e.g., social security, Medicare and Medicaid); and other income (e.g. interest, dividends and profits of non-corporate business activities, including property rentals).

Personal income in July 2020 was 4.8 percent higher than in the preceding February (the last month before the Covid-19 recession began). Increases in unemployment insurance and other government social benefits (together up 53.7 percent over the period) more than offset the decline in employee compensation (down 4.6 percent). The unusually large value of other government social benefits for April reflects the government stimulus checks mailed to low- and moderate-income households.

He acknowledges that there may be a decline in the next reports reflecting the loss of the extra $600 federal UI assistance. Also, note the consumption line.

Also on the first chart, the black line shows monthly consumer outlays. Again these numbers are seasonally adjusted annual rates. Despite the increase in personal income, consumption in July 2020 was 5.4 per cent less than in the preceding February.

That may help us understand the savings rate chart.

Sjoblom explains,

Also on the first chart, the black line shows monthly consumer outlays. Again these numbers are seasonally adjusted annual rates. Despite the increase in personal income, consumption in July 2020 was 5.4 per cent less than in the preceding February.

The saving rate jumped from 8.3 percent in February to an astounding 33.7 percent in April and then declined to a still quite high 17.8 percent in July.

Perhaps that elevated savings rate can help carry spending forward for a while. 

It seems that the UI system and extraordinary federal aid achieved the goal of sustaining households through what we hope has been the worst part of the pandemic. The assistance also maintained a higher level of consumer spending than may have been anticipated in the gloomier government revenue forecasts. Something to watch.