Data: U.S. Bureau of Economic Analysis; Chart: Axios Visuals

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

Go deeper

Felix Salmon, author of Capital
Sep 17, 2020 - Economy & Business

Income inequality gap widened to record highs in 2019

Data: Census Bureau; Chart: Axios Visuals

If your household has an income of more than $200,000 per year, it was always in the top 10% — until 2019.

By the numbers: New data from the Census Bureau shows that the gap between the richest and everybody else widened to record highs in 2019.

Dion Rabouin, author of Markets
Sep 17, 2020 - Economy & Business

An uncertain Fed for an uncertain time

Photo illustration: Eniola Odetunde/Axios. Photo: Zach Gibson/Stringer/Getty Images

The Fed policy meeting Wednesday that was designed to further clarify its new stance on "average inflation targeting" — a topic addressed by multiple policymakers on its rate-setting committee in the month since it was announced — left the market with more questions than answers.

What's happening: The Fed announced that not only was it keeping U.S. interest rates at essentially zero for now but it plans to keep them there until at least 2023, extending its forecast an additional year.

2 hours ago - Health

Fauci says if people won't wear masks, maybe it should be mandated

Anthony Fauci. Photo: Graeme Jennings- Pool/Getty Images

NIAID director Anthony Fauci told CNN on Friday evening that if "people are not wearing masks, then maybe we should be mandating it."

Why it matters: Fauci made the comments the same day the U.S. hit its highest daily COVID-19 case count since the pandemic began.