Sign up for our daily briefing
Make your busy days simpler with Axios AM/PM. Catch up on what's new and why it matters in just 5 minutes.
Catch up on the day's biggest business stories
Subscribe to Axios Closer for insights into the day’s business news and trends and why they matter
Stay on top of the latest market trends
Subscribe to Axios Markets for the latest market trends and economic insights. Sign up for free.
Sports news worthy of your time
Binge on the stats and stories that drive the sports world with Axios Sports. Sign up for free.
Tech news worthy of your time
Get our smart take on technology from the Valley and D.C. with Axios Login. Sign up for free.
Get the inside stories
Get an insider's guide to the new White House with Axios Sneak Peek. Sign up for free.
Catch up on coronavirus stories and special reports, curated by Mike Allen everyday
Catch up on coronavirus stories and special reports, curated by Mike Allen everyday
Want a daily digest of the top Denver news?
Get a daily digest of the most important stories affecting your hometown with Axios Denver
Want a daily digest of the top Des Moines news?
Get a daily digest of the most important stories affecting your hometown with Axios Des Moines
Want a daily digest of the top Twin Cities news?
Get a daily digest of the most important stories affecting your hometown with Axios Twin Cities
Want a daily digest of the top Tampa Bay news?
Get a daily digest of the most important stories affecting your hometown with Axios Tampa Bay
Want a daily digest of the top Charlotte news?
Get a daily digest of the most important stories affecting your hometown with Axios Charlotte
Sign up for Axios NW Arkansas
Stay up-to-date on the most important and interesting stories affecting NW Arkansas, authored by local reporters
Americans' personal income fell 4.2% last month, which was better than expected, but remained supported by increased government spending on unemployment benefits, food stamps and other generalized welfare payments that are all at never-before-imagined highs.
Why it matters: Personal spending ticked up, largely supported by one-time CARES Act direct payments, with personal income excluding government transfers up 1.5% from April.
- However, disposable income fell 4.9%, suggesting that the U.S. household remains impaired despite millions being recalled to work.
By the numbers: Personal income was up 7.0% as of May, but wages and salaries were down 5.4% year over year, with government transfers still up 67.5% from their May 2019 level (but down from an increase of 90.1% in April).
- Importantly, proprietor income rose 2.8% in May, month-over-month, after being down 12.7% in April, suggesting small businesses are starting to come back online.
- Consumption was driven by a 28.4% increase in spending on durable goods, with new and used autos up 40.8%, and other durables up 24.5%.
What we're hearing: "The collapse in spending on discretionary services, mostly leisure, recreation, and food service, is the drag here," notes Ian Shepherdson, chief economist at Pantheon Macroeconomics.
- "June spending will be much stronger, but we’re worried that July and August could see a relapse, led by a consumer retreat in the South and parts of the West, in the face of the surge in COVID infections."
The big picture: "It is clear that following the one-time bounce in spending observed this month, income and savings dynamics are moving in a direction that suggests that a general paradox of thrift has, for now, captured wealth households," Joe Brusuelas, chief economist at RSM, wrote in a note to clients.
Go deeper: Coronavirus lockdowns heighten income inequities of school-from-home