EDITOR NOTE: Has the economy fallen off the edge of a financial cliff, as the author below claims? Can we arguably say that a large portion of last quarter’s economic recovery, as measured in personal income and consumer spending, was all due to the stimulus? If true, then it paints an ominous picture indeed. The stimulus has ended, and the next isn’t arriving anytime soon. Meanwhile, 27 million people have gone for over a month without the necessary stimulus checks to pay rent, buy groceries, and cover all other daily necessities. If you find this outlook reasonable, then our economic woes, and the social unrest that may come with it, will only intensify in the months ahead.
Personal Income and Outlays, July 2020
The charts reflect data from today's BEA report on Personal Income and Outlays, July 2020.
- Personal income increased $70.5 billion (0.4 percent) in July. Disposable personal income (DPI) increased $39.9 billion (0.2 percent) and personal consumption expenditures (PCE) increased $267.6 billion (1.9 percent).
- Real DPI decreased 0.1 percent in July and Real PCE increased 1.6 percent. The PCE price index increased 0.3 percent. Excluding food and energy, the PCE price index increased 0.3 percent.
On the surface, things look ok.
Real Disposable Personal Income (DPI) was down a mere 0.1 percent while consumer spending more than held up.
Personal Consumption Expenditures (PCE), consumer spending, rose 1.6%.
This is an ominous picture because the Congressional Covid stimulus expired on July 25.
That's when the last weekly stimulus check of $600 was sent. As of August 28, consumers will have missed 5 weekly checks of $600 each.
How Many People?
The answer comes from my post yesterday Unemployment Claims are Still Extremely Elevated.
All Continued Claims
Over 27 million people missed 5 weekly checks of $600 each.
Here's the math: 27 million * 5 * $600 = $81 billion dollars.
That is money consumers don't have to pay the rent, pay mortgages, or but food.
Some of those checks went to people working part-time. Continued claims represent people not working at all.
Continued claims are covered employees who worked no hours. That's at least 14.5 million. But that total does not include gig workers, self-employed, and other workers not covered at the state level.
My best guess is around 20 million people are solely reliant on pandemic assistance. Of them about 6 million have no money coming in at all.
14.5 million have only state benefits and that is not nearly enough to pay the bills.
Congressional bickering over the amount of stimulus has been ongoing for months. Forbes has the latest details as of today.
- According to Reuters, Meadows said the $1.3 trillion bill was offered to Democrats privately.
- In their first conversation in weeks, Meadows and House Speaker Nancy Pelosi (D-Calif.) spoke for 25 minutes via phone on Thursday but did not make any progress towards reaching an agreement.
- Meadows described the call as “25 minutes of nothing,” Fox Business reported, and Pelosi said in a statement that the conversation made it clear that “the White House continues to disregard the needs of the American people.”
- Pelosi also said Thursday that Democrats were “not budging” on their latest offer.
No End in Sight to Bickering
Despite over 20 million people are severely impacted and have been for 5 weeks, there is no end in sight to the bickering.
Financial Cliff Has Started
A financial cliff is not coming up, it has already started. It will show up in the August data accompanied by a jump in evictions and repossessions.
Originally posted on The Street