- Personal income for Americans climbed by 21.1% in March, the Commerce Department said Friday.
- It’s the highest on record in data that goes all the way back to 1946; spending was up by 4.2%.
- The income jump was supported by the $1.9 trillion stimulus signed into law by President Biden.
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Income for American households in March surged by the largest amount ever, fueled by massive fiscal stimulus released by the US government to limit the economic damage from the COVID-19 health crisis.
Personal income soared by an estimated 21.1% last month, or by $4.21 trillion, the Bureau of Economic Analysis said Friday. The figure compares to a 20.3% increase expected in an Econoday survey of economists. The March figure marked a swing from February’s income decline of 7%.
The monthly income leap was the biggest on record in data that goes back to 1946.
“Incomes soared as a result of the stimulus payments made under the March relief bill,” said Ian Shepherdson, chief economist at Pantheon Macroeconomics, in a Friday note, referring to the $1.9 trillion stimulus package that President Joe Biden signed into law, which unleashed $1,400 checks to most Americans.
Income readings “will correct in both April and May, but income from employment will rise much more strongly over the next few months and, in any event, most of the payments have not yet been spent,” wrote Shepherdson.
The Commerce Department’s report also showed that spending, or personal consumption, leapt by 4.2% last month. “The jump in March spending … was clearly signaled by the retail sales numbers,” Shepherdson said.
Retail sales pushed higher by 9.8% in March to a record $619.1 billion, the Census Bureau said earlier this month.
Jason Furman, a Harvard economics professor and chairman of the Council of Economic Advisers to former President Barack Obama, wrote on Twitter about the unique nature of the report. He noted that the real disposable personal income shooting up 23% was a one-time bump attributable to stimulus checks, and that it normally takes about two years for real personal consumption expenditures to shoot up by 3.6%.
The White House commented that the report shows the importance of government support during the pandemic. It said the largest contribution to income during the pandemic came from government benefits, which were up over $300 billion over the month (almost $4 trillion at an annualized rate). Americans’ saving rate of 28% was the second-highest on record, it noted, and much higher than the average pre-crisis saving rate of 7.5%.