Sunday, July 5, 2020

Increase of Total Nonfarm Payroll Jobs by 4.800 Million and of Private Payroll Jobs by 4.767 Million in Jun 2020 In The Global Recession of Lockdown of Economic Activity in the COVID-19 Event, Beginning Recovery of United States Vehicle Sales, Forty-One Million Unemployed or Underemployed in the Lost Economic Cycle of the Global Recession with Economic Growth Underperforming Below Trend Worldwide, Sample Hurdles in Measuring Real Wages, Cyclically Stagnating Real Disposable Income Per Capita, Beginning Recovery of Personal Consumption, Financial Repression, World Cyclical Slow Growth, and Government Intervention in Globalization: Part II


Increase of Total Nonfarm Payroll Jobs by 4.800 Million and of Private Payroll Jobs by 4.767 Million in Jun 2020 In The Global Recession of Lockdown of Economic Activity in the COVID-19 Event, Beginning Recovery of United States Vehicle Sales, Forty-One Million Unemployed or Underemployed in the Lost Economic Cycle of the Global Recession with Economic Growth Underperforming Below Trend Worldwide, Sample Hurdles in Measuring Real Wages, Cyclically Stagnating Real Disposable Income Per Capita, Beginning Recovery of Personal Consumption, Financial Repression, World Cyclical Slow Growth, and Government Intervention in Globalization

Carlos M. Pelaez

© Carlos M. Pelaez, 2009, 2010, 2011, 2012, 2013, 2014, 2015, 2016, 2017, 2018, 2019, 2020.

I Forty-One Million Unemployed or Underemployed in the Lost Economic Cycle of the Global Recession with Economic Growth Underperforming Below Trend Worldwide

IA2 Number of People in Job Stress

IA3 Long-term and Cyclical Comparison of Employment

IA4 Job Creation

IB Stagnating Real Wages

II Stagnating Real Disposable Income and Consumption Expenditures

IIB1 Stagnating Real Disposable Income and Consumption Expenditures

IB2 Financial Repression

III World Financial Turbulence

IV Global Inflation

V World Economic Slowdown

VA United States

VB Japan

VC China

VD Euro Area

VE Germany

VF France

VG Italy

VH United Kingdom

VI Valuation of Risk Financial Assets

VII Economic Indicators

VIII Interest Rates

IX Conclusion

References

Appendixes

Appendix I The Great Inflation

IIIB Appendix on Safe Haven Currencies

IIIC Appendix on Fiscal Compact

IIID Appendix on European Central Bank Large Scale Lender of Last Resort

IIIG Appendix on Deficit Financing of Growth and the Debt Crisis

Foreword A. Total nonfarm payroll employment seasonally adjusted (SA) increased 4.800 million in Jun 2020 and private payroll employment increased 4.767 million. The Bureau of Labor Statistics states (https://www.bls.gov/news.release/empsit.nr0.htm): “Our analysis suggests that the net effect of these hurricanes [Harvey and Irma] was to reduce the estimate of total nonfarm payroll employment for September. There was no discernible effect on the national unemployment rate. No changes were made to either the establishment or household survey estimation procedures for the September figures.” A hurdle in analyzing the labor market is the global recession, with output in the US reaching a high in Feb 2020 (https://www.nber.org/cycles.html), in the lockdown of economic activity in the COVID-19 event (https://www.bls.gov/cps/employment-situation-covid19-faq-june-2020.pdf).

Table I-8, US, Monthly Change in Jobs, Number SA

Month

1981

1982

1983

2008

2009

2010

Private

1993

2020

Jan

299

214

179

Feb

250

251

220

Mar

-50

-1373

-1356

Apr

302

-20787

-19835

May

272

2699

3232

Jun

181

4800

4767

Source: US Bureau of Labor Statistics

https://www.bls.gov/data

Foreword B. Table VA-1B provides the seasonally adjusted annual rate of total vehicle sales in the United States. The rate decreased from 17.705 in Jun 2019 and 17.203 in Feb 2020 to 9.051 in Apr 2020 in the lockdown of economic activity in the global recession, with output in the US reaching a high in Feb 2020 (https://www.nber.org/cycles.html), in the lockdown of economic activity in the COVID-19 event. The rate recovered to 12.624 in May 2020 and 13.351 in Jun 2020 in gradual return to economic activity.

Table VA-1B, United States, Annual Rate, Total Vehicle Sales, Seasonally Adjusted Annual Rate

2019-01-01

17.238

2019-02-01

17.026

2019-03-01

17.773

2019-04-01

17.049

2019-05-01

17.933

2019-06-01

17.705

2019-07-01

17.442

2019-08-01

17.512

2019-09-01

17.723

2019-10-01

17.046

2019-11-01

17.447

2019-12-01

17.120

2020-01-01

17.364

2020-02-01

17.203

2020-03-01

11.779

2020-04-01

9.051

2020-05-01

12.624

2020-06-01

13.351

Source: Economic Research Division, Federal Reserve Bank of St. Louis

https://fred.stlouisfed.org/series/TOTALSA

Chart I-4 of the Economic Research Division, Federal Reserve Bank of St. Louis, provides the complete data set of SAAR of total car sales in the US. The SAAR of 9.051 in Apr 2020 is lower than the lowest rate in the global recession at 9.223 in Feb 2009.

clip_image002

Chart I-4, SA Annual Rate of Total Car Sales in the United States, Jan 1976 to Apr 2020

Source: Economic Research Division, Federal Reserve Bank of St. Louis

https://fred.stlouisfed.org/series/TOTALSA

Chart I-5 of the Board of Governors of the Federal Reserve provides output of motor vehicles and parts in the United States from 1972 to 2020. Output virtually stagnated since the late 1990s with recent increase followed by the highest decrease in the data history in the lockdown of economic activity in the COVID-19 event.

clip_image003

Chart 1-5, US, Motor Vehicles and Parts Output, 1972-2020

Source: Board of Governors of the Federal Reserve System

https://www.federalreserve.gov/releases/g17/Current/default.htm

I IB Stagnating Real Disposable Income and Consumption Expenditures. The Bureau of Economic Analysis (BEA) provides important revisions and enhancements of data on personal income and outlays since 1929 (http://www.bea.gov/iTable/index_nipa.cfm). There are waves of changes in personal income and expenditures in Table IB-1 that correspond somewhat to inflation waves observed worldwide (https://cmpassocregulationblog.blogspot.com/2020/05/mediocre-cyclical-united-states_31.html and earlier https://cmpassocregulationblog.blogspot.com/2020/04/valuations-of-risk-financial-assets.html) because of the influence through price indexes. There are wide fluctuations in Nov and Dec 2012 by the rush to realize income of all forms in anticipation of tax increases beginning in Jan 2013. There is major distortion in Jan 2013 because of higher contributions in payrolls to government social insurance that caused sharp reduction in personal income and disposable personal income. The Bureau of Economic Analysis (BEA) explains as follows (page 3 http://www.bea.gov/newsreleases/national/pi/2013/pdf/pi0313.pdf):

“The February and January [2013] changes in disposable personal income (DPI) mainly reflected the effect of special factors in January, such as the expiration of the “payroll tax holiday” and the acceleration of bonuses and personal dividends to November and to December [2012] in anticipation of changes in individual tax rates.”

The BEA provides the annual update of the national income and product account (https://cmpassocregulationblog.blogspot.com/2017/07/data-dependent-monetary-policy-with_30.html): “Annual Update of the National Income and Product Accounts

The estimates released today reflect the results of the annual update of the national income and

product accounts (NIPAs) in conjunction with preliminary estimates for June 2017. The update covers the most recent 3 years and the first 5 months of 2017. For more information, see information on the “2017 Annual Update” on BEA’s website. Additionally, the August Survey of Current Business will contain an article that describes the results in detail.”

The BEA provides “Comprehensive Update of the National Income and Product Accounts” on Jul 31, 2018 with revisions since 1929 (https://cmpassocregulationblog.blogspot.com/2018/07/revision-of-united-states-national.html): “The estimates released today also reflect the results of the 15th comprehensive update of the National Income and Product Accounts (NIPAs). The updated estimates reflect previously announced improvements (https://www.bea.gov/scb/2018/04-april/0418-preview-2018-comprehensive-nipa-update.htm), and include the introduction of new not seasonally adjusted estimates for GDP, GDI and their major components. For more information, see the Technical Note. Revised NIPA table stubs, initial results, and background materials are available on the BEA website (https://www.bea.gov/index.htm).” The BEA provides the “Annual Update of the National Income and Product Accounts” on Jul 26, 2019 (https://www.bea.gov/system/files/2019-07/NIPA-AU19-Briefing.pdf).

In the first wave in Jan-Apr 2011 with relaxed risk aversion, nominal personal income (NPI) increased at the annual equivalent rate of 7.4 percent, nominal disposable personal income (NDPI) at 4.6 percent and nominal personal consumption expenditures (NPCE) at 5.8 percent. Real disposable income (RDPI) increased at the annual equivalent rate of 0.3 percent and real personal consumption expenditures (RPCE) rose at annual equivalent 1.2 percent. In the second wave in May-Aug 2011 under risk aversion, NPI rose at annual equivalent 4.0 percent, NPDI at 4.0 percent and NPCE at 3.0 percent. RDPI increased at 1.8 percent annual equivalent and RPCE at 1.2 percent annual equivalent. With mixed shocks of risk aversion in the third wave from Sep to Dec 2011, NPI rose at 3.6 percent annual equivalent, NDPI at 4.3 percent and NPCE at 2.1 percent. RDPI increased at 2.7 percent annual equivalent and RPCE at 0.9 percent annual equivalent. In the fourth wave from Jan to Mar 2012, NPI increased at 9.2 percent annual equivalent, NDPI at 10.0 percent and NPCE at 6.6 percent. Real disposable income (RDPI) is more dynamic in the revisions, growing at 7.0 percent annual equivalent and RPCE at 3.7 percent. The policy of repressing savings with zero interest rates stimulated growth of nominal consumption (NPCE) at the annual equivalent rate of 6.6 percent and real consumption (RPCE) at 3.7 percent. In the fifth wave in Apr-Jul 2012, NPI increased at annual equivalent 0.0 percent, NDPI at minus 0.6 percent and RDPI at minus 0.3 percent. Financial repression failed to stimulate consumption with NPCE growing at 0.9 percent annual equivalent and RPCE at 0.6 percent. In the sixth wave in Aug-Oct 2012, in another wave of carry trades into commodity futures, NPI increased at 7.9 percent annual equivalent and NDPI increased at 7.4 percent while real disposable income (RDPI) increased at 3.6 percent annual equivalent. NPCE increased at 4.1 percent and RPCE changed at 0.8 percent. Data for Nov-Dec 2012 have illusory increases: “Personal income in November and December was boosted by accelerated and special dividend payments to persons and by accelerated bonus payments and other irregular pay in private wages and salaries in anticipation of changes in individual income tax rates. Personal income in December was also boosted by lump-sum social security benefit payments” (page 2 at http://www.bea.gov/newsreleases/national/pi/2013/pdf/pi1212.pdf). In the seventh wave, anticipations of tax increases in Jan 2013 caused exceptional income gains that increased personal income to annual equivalent 26.8 percent in Nov-Dec 2012, nominal disposable income at 25.3 percent and real disposable personal income at 26.1 percent with likely effects on nominal personal consumption that increased at 1.8 percent and real personal consumption at 2.4 percent with subdued prices. The numbers in parentheses show that without the exceptional effects NDPI (nominal disposable personal income) increased at 5.5 percent and RDPI (real disposable personal income) at 8.7 percent. In the eighth wave, nominal personal income fell 4.7 percent in Jan 2013 or at the annual equivalent rate of decline of 43.9 percent; nominal disposable personal income fell 5.6 percent or at the annual equivalent rate of decline of 49.9 percent; real disposable income fell 5.8 percent or at the annual rate of decline of 51.2 percent; nominal personal consumption expenditures increased 0.6 percent or at the annual equivalent rate of 7.4 percent; and real personal consumption expenditures increased 0.4 percent or at the annual equivalent rate of 4.9 percent. The savings rate fell significantly from 12.0 percent in Dec 2012 to 6.3 percent in Jan 2013. The Bureau of Economic Analysis explains as follows (http://www.bea.gov/newsreleases/national/pi/2013/pdf/pi0113.pdf 3):

“Contributions for government social insurance -- a subtraction in calculating personal income -- increased $126.7 billion in January, compared with an increase of $6.3 billion in December. The

January estimate reflected increases in both employer and employee contributions for government social insurance. The January estimate of employee contributions for government social insurance reflected the expiration of the “payroll tax holiday,” that increased the social security contribution rate for employees and self-employed workers by 2.0 percentage points, or $114.1 billion at an annual rate. For additional information, see FAQ on “How did the expiration of the payroll tax holiday affect personal income for January 2013?” at www.bea.gov. The January estimate of employee contributions for government social insurance also reflected an increase in the monthly premiums paid by participants in the supplementary medical insurance program, in the hospital insurance provisions of the Patient Protection and Affordable Care Act, and in the social security taxable wage base; together, these changes added $12.8 billion to January. As noted above, employer contributions were boosted $5.9 billion in January, so the total contribution of special factors to the January change in contributions for government social insurance was $132.8 billion”

Further explanation is provided by the Bureau of Economic Analysis (http://www.bea.gov/newsreleases/national/pi/2013/pdf/pi0213.pdf 2-3):

“Contributions for government social insurance -- a subtraction in calculating personal income --increased $6.4 billion in February, compared with an increase of $126.8 billion in January. The

January estimate reflected increases in both employer and employee contributions for government social insurance. The January estimate of employee contributions for government social insurance reflected the expiration of the “payroll tax holiday,” that increased the social security contribution rate for employees and self-employed workers by 2.0 percentage points, or $114.1 billion at an annual rate. For additional information, see FAQ on “How did the expiration of the payroll tax holiday affect personal income for January 2013?” at www.bea.gov. The January estimate of employee contributions for government social insurance also reflected an increase in the monthly premiums paid by participants in the supplementary medical insurance program, in the hospital insurance provisions of the Patient Protection and Affordable Care Act, and in the social security taxable wage base; together, these changes added $12.9 billion to January. Employer contributions were boosted $5.9 billion in January, which reflected increases in the social security taxable wage base (from $110,100 to $113,700), in the tax rates paid by employers to state unemployment insurance, and in employer contributions for the federal unemployment tax and for pension guaranty. The total contribution of special factors to the January change in contributions for government social insurance was $132.9 billion. The January change in disposable personal income (DPI) mainly reflected the effect of special factors, such as the expiration of the “payroll tax holiday” and the acceleration of bonuses and personal dividends to December in anticipation of changes in individual tax rates. Excluding these special factors and others, which are discussed more fully below, DPI increased $46.8 billion in February, or 0.4 percent, after increasing $15.8 billion, or 0.1 percent, in January.”

The increase was provided in the “fiscal cliff” law H.R. 8 American Taxpayer Relief Act of 2012 (http://www.gpo.gov/fdsys/pkg/BILLS-112hr8eas/pdf/BILLS-112hr8eas.pdf). In the ninth wave in Feb-Mar 2013, nominal personal income changed at 0.0 percent and nominal disposable income fell at 0.6 percent annual equivalent, while real disposable income decreased at 1.8 percent annual equivalent. Nominal personal consumption expenditures grew at 1.2 percent annual equivalent and real personal consumption expenditures at 0.0 percent annual equivalent. The savings rate collapsed from 8.8 percent in Oct 2012, 9.7 percent in Nov 2012 and 12.0 percent in Dec 2012 to 6.3 percent in Jan 2013, 5.8 percent in Feb 2013 and 5.9 percent in Mar 2013. In the tenth wave from Apr to Sep 2013, personal income grew at 3.9 percent annual equivalent, nominal disposable income increased at annual equivalent 4.1 percent and nominal personal consumption expenditures at 2.4 percent. Real disposable income grew at 3.2 percent annual equivalent and real personal consumption expenditures at 1.4 percent. In the eleventh wave, nominal personal income fell at 1.2 percent annual equivalent in Oct 2013, nominal disposable income fell at 1.2 percent and real disposable income fell at 3.5 percent. Nominal personal consumption expenditures increased at 6.2 percent annual equivalent and real personal consumption expenditures at 3.7 percent. In the twelfth wave, nominal personal income increased at 6.2 percent annual equivalent in Nov 2013, nominal disposable income at 6.2 percent and nominal personal consumption expenditures at 7.4 percent. Real disposable income increased at annual equivalent 3.7 percent and real personal consumption expenditures at 4.9 percent. In the thirteenth wave, nominal personal income increased at 7.4 percent annual equivalent in Dec 2013 and nominal disposable income at 6.2 percent while real disposable income increased at 3.7 percent annual equivalent. Nominal personal consumption expenditures increased at 3.7 percent annual equivalent and 1.2 percent for real personal consumption expenditures. In the fourteenth wave, nominal personal income increased at 8.7 percent annual equivalent in Jan-Mar 2014, nominal disposable income at 8.7 percent and nominal consumption expenditures at 4.5 percent. Real disposable personal income increased at 6.6 percent and real personal consumption expenditures at 2.8 percent. In the fifteenth wave, nominal personal income increased at 6.4 percent in annual equivalent in Apr-Aug 2014 and nominal disposable income at 6.7 percent. Real disposable income increased at 5.2 percent in annual equivalent in Apr-Aug 2014. Nominal personal consumption increased at 6.2 percent annual equivalent in Apr-Aug 2014 and real personal consumption expenditures increased at 4.7 percent. In the sixteenth wave, nominal personal income increased at 5.2 percent annual equivalent in Sep-Dec 2014, nominal disposable income at 4.9 percent and nominal personal consumption at 3.3 percent. Real disposable income increased at 5.5 percent in Sep-Dec 2014 and real personal consumption expenditure at 4.0 percent. In the seventeenth wave, nominal personal income increased at 4.9 percent annual equivalent in Jan-Feb 2015 and nominal disposable income increased at 2.4 percent while nominal personal consumption expenditures increased at 1.2 percent. Real disposable income increased at 4.9 percent and real personal consumption expenditures at 3.0 percent. In the eighteenth wave, nominal personal income (NPI) increased at 4.9 percent and nominal disposable personal income (NDPI) increased at 4.5 percent annual equivalent in Mar-Jun 2015. Real disposable income (RDPI) increased at 2.4 percent. Nominal consumption expenditures (NPCE) increased at 5.7 percent and real personal consumption expenditures (RPCE) increased at 3.7 percent. In the nineteenth wave, nominal personal income (NPI) increased at 3.7 percent in Jun-Aug 2015 and nominal disposable personal income (NDPI) at 3.7 percent. Real disposable income (RDPI) increased at 2.4 percent, nominal personal consumption expenditures (NPCE) at 4.1 percent and real personal consumption expenditures (RPCE) at 2.8 percent. In the twentieth wave, nominal personal income (NPI) increased at 0.9 percent annual equivalent in Sep-Dec 2015, nominal disposable personal income (NDPI) at 1.2 percent and nominal personal consumption expenditures (NPCE) at 1.5 percent. Real disposable personal income grew at 1.5 percent annual equivalent and real personal consumption expenditures at 1.8 percent. In the twenty-first wave, nominal personal income increased at 1.2 percent annual equivalent in Jan-Feb 2016. Nominal disposable personal income increased at 3.0 percent and nominal personal consumption expenditures increased at 4.9 percent. Real disposable personal income increased at 3.0 percent and real personal consumption expenditures increased at 4.9 percent. In the twenty-second wave, nominal personal income increased at 3.0 percent in Mar-Apr 2016. Nominal disposable income increased at 3.0 percent and real disposable income fell at 0.6 percent. Nominal personal consumption expenditures grew at 4.9 percent and real personal consumption expenditures increased at 1.2 percent. In the twenty-third wave, nominal personal income increased at 3.2 percent in May-Jul 2016 and nominal disposable income at 2.8 percent while nominal consumption expenditures increased at 4.9 percent. Real disposable income increased at 0.8 percent and real consumption expenditures at 2.8 percent. In the twenty-fourth wave, nominal personal income increased at 4.5 percent in Aug-Oct 2016 and nominal disposable income at 4.5 percent while nominal consumption expenditures increased at 4.5 percent. Real disposable income increased at 2.4 percent and real personal consumption expenditures increased at 2.4 percent. In the twenty-fifth wave, nominal personal income increased at 3.7 percent and nominal disposable income increased at 3.7 percent in Nov-Dec 2016. Nominal personal consumption expenditures increased at 4.9 percent. Real personal disposable income increased at 2.4 percent and real personal consumption expenditures increased at 3.7 percent. In the twenty-sixth wave, nominal personal income increased at annual equivalent 8.1 percent in Jan-Feb 2017, nominal disposable income at 9.4 percent and nominal personal consumption expenditures at 3.0 percent. Real disposable income increased at 6.2 percent and real personal consumption expenditures increased at 0.6 percent. In the twenty-seventh wave, nominal personal income increased at 4.1 percent in Mar-May 2017 and nominal disposable income at 3.2 percent while nominal personal consumption increased at 3.2 percent. Real disposable income increased at 3.2 percent annual equivalent and real personal consumption expenditures increased at 2.8 percent. In the twenty-eighth wave, nominal personal income increased at 1.2 percent in Jun 2017 and nominal disposable income changed at 0.0 percent while nominal personal consumption increased at 4.9 percent. Real disposable income decreased at 1.2 percent and real consumption expenditures increased at 3.7 percent. In the twenty-ninth wave, nominal personal income increased at 4.9 percent in Jul-Aug 2017 while nominal disposable personal income increased at 4.9 percent. Real disposable income increased at 3.0 percent. Nominal personal consumption expenditures increased at 3.0 percent and real personal consumption expenditures increased at 1.2 percent. In the thirtieth wave, nominal personal income increased at 8.1 percent in Sep-Oct 2017 while nominal disposable personal income increased at 6.8 percent. Real disposable income increased at 3.7 percent. Nominal personal consumption expenditures increased at 8.1 percent and real personal consumption expenditures increased at 4.9 percent. In the thirty-first wave, nominal personal income increased at 7.4 percent in Nov 2017 while nominal disposable personal income increased at 6.3 percent. Nominal personal consumption expenditures increased at 8.7 percent. Real disposable income increased at 3.7 percent and real personal consumption expenditures increased at 4.9 percent. In the thirty-second wave, nominal personal income increased at 8.7 percent in Dec 2017-Jan 2018 while nominal disposable personal income increased at 12.0 percent. Nominal personal consumption expenditures increased at 4.9 percent. Real disposable income increased at 8.7 percent and real personal consumption expenditures increased at 1.8 percent. In the thirty-third wave, nominal personal income increased at 4.5 percent in Feb-Apr 2018 while nominal disposable personal income increased at 4.9 percent. Nominal personal consumption expenditures increased at 4.9 percent. Real disposable income increased at 3.2 percent and real personal consumption expenditures increased at 2.4 percent. In the thirty-fourth wave, nominal personal income increased at 5.3 percent in May-Jul 2018 while nominal disposable personal income increased at 5.7 percent. Nominal personal consumption expenditures increased at 6.6 percent. Real disposable income increased at 3.2 percent and real personal consumption expenditures increased at 4.1 percent. In the thirty-fifth wave, nominal personal income increased at 2.8 percent in Aug-Oct 2018 while nominal disposable personal income increased at 3.7 percent. Nominal personal consumption expenditures increased at 4.5 percent. Real disposable income increased at 2.4 percent and real personal consumption expenditures increased at 2.8 percent. In the thirty-sixth wave, nominal personal income increased at 2.4 percent annual equivalent in Nov 2018 while nominal disposable personal income increased at 2.4 percent. Nominal personal consumption expenditures increased at 3.7 percent. Real disposable income increased at 1.2 percent and real personal consumption expenditures increased at 3.7 percent. In the thirty-seventh wave, nominal personal income increased at 11.4 percent annual equivalent in Dec 2018 while nominal disposable personal income increased at 12.7 percent. Nominal personal consumption expenditures decreased at 9.2 percent. Real disposable income increased at 11.4 percent and real personal consumption expenditures decreased at 10.3 percent. In the thirty-eighth wave, nominal personal income increased at 3.7 percent in Jan 2019 while nominal disposable personal income changed at 0.0 percent. Nominal personal consumption expenditures increased at 7.4 percent. Real disposable income increased at 1.2 percent and real personal consumption expenditures increased at 7.4 percent. In the thirty-ninth wave, nominal personal income increased at 6.2 percent in Feb-Mar 2019 while nominal disposable personal income increased at 5.5 percent. Nominal personal consumption expenditures increased at 5.5 percent. Real disposable income increased at 3.7 percent and real personal consumption expenditures increased at 3.6 percent. In the fortieth wave, nominal personal income increased at 3.7 percent in Apr-Jun 2019 while nominal disposable income increased at 3.7 percent. Nominal personal consumption expenditures increased at 5.7 percent. Real disposable income increased at 1.2 percent and real personal consumption expenditures increased at 3.7 percent. In the forty-first wave, nominal personal income changed at 0.0 percent annual equivalent in Jul 2019 while nominal disposable income increased at 2.4 percent. Nominal personal consumption increased at 6.2 percent. Real disposable income decreased at 1.2 percent and real personal consumption expenditures increased at 3.7 percent. In the forty-second wave, nominal personal income increased at 3.7 percent annual equivalent in Aug-Sep 2019 while nominal disposable income increased at 4.9 percent. Nominal personal consumption increased at 3.0 percent. Real disposable income increased at 4.9 percent and real personal consumption expenditures increased at 2.4 percent. In the forty-third wave, nominal personal income increased at 3.7 percent annual equivalent in Oct-Dec 2019 while nominal disposable income increased at 3.2 percent. Nominal personal consumption increased at 4.1 percent. Real disposable income increased at 0.8 percent and real personal consumption expenditures increased at 1.6 percent. In the forty-fourth wave, nominal personal income increased at 6.8 percent annual equivalent in Jan-Feb 2020 while nominal disposable income increased at 6.8 percent. Nominal personal consumption increased at 2.4 percent. Real disposable income increased at 5.5 percent and real personal consumption expenditures increased at 1.2 percent. In the forty-fifth wave, in the global recession, with output in the US reaching a high in Feb 2020 (https://www.nber.org/cycles.html), in the lockdown of economic activity in the COVID-19 event, nominal personal income increased at 61.9 percent annual equivalent in Mar-Apr 2020 while nominal disposable income increased at 84.3 percent. Nominal personal consumption decreased at 70.4 percent. Real disposable income increased at 92.7 percent and real personal consumption expenditures decreased at 69.2 percent. The BEA explains (https://www.bea.gov/sites/default/files/2020-05/pi0420_0.pdf): The increase in personal income in April primarily reflected an increase in government social benefits to persons as payments were made to individuals from federal economic recovery programs in response to the COVID-19 pandemic (table 3). For more information, see “How are the economic impact payments for individuals authorized by the CARES Act of 2020 recorded in the NIPAs?” “Other government social benefits to persons” are $3,122.1 billion in Apr 2020 compared with $528.3 billion in Mar 2020 (https://www.bea.gov/sites/default/files/2020-05/pi0420_0.pdf). In the forty-sixth wave, in the global recession, with output in the US reaching a high in Feb 2020 (https://www.nber.org/cycles.html), in the lockdown of economic activity in the COVID-19 event, nominal personal income decreased at 40.2 percent annual equivalent in May 2020 while nominal disposable income decreased at 45.2 percent. Nominal personal consumption increased at 157.4 percent. Real disposable income decreased at 46.0 percent and real personal consumption expenditures increased at 154.6 percent. The BEA explains as follows (https://www.bea.gov/sites/default/files/2020-06/pi0520_0.pdf): “The May estimate for personal income and outlays was impacted by the response to the spread

of COVID-19. Federal economic recovery payments continued but were at a lower level than in

April, and government “stay-at-home” orders were partially lifted in May. The full economic

effects of the COVID-19 pandemic cannot be quantified in the personal income and outlays

estimate for May because the impacts are generally embedded in source data and cannot be

separately identified. For more information, see the “highlights” file and the Effects of Selected

Federal Pandemic Response Programs on Personal Income table.”

There is socio-economic stress in the combination of adverse events and cyclical performance:

and earlier http://cmpassocregulationblog.blogspot.com/2015/07/fluctuating-risk-financial-assets.html and earlier http://cmpassocregulationblog.blogspot.com/2015/06/fluctuating-financial-asset-valuations.html and earlier http://cmpassocregulationblog.blogspot.com/2015/05/fluctuating-valuations-of-financial.html and earlier http://cmpassocregulationblog.blogspot.com/2015/04/global-portfolio-reallocations-squeeze.html and earlier http://cmpassocregulationblog.blogspot.com/2015/03/impatience-with-monetary-policy-of.html and earlier (http://cmpassocregulationblog.blogspot.com/2015/02/world-financial-turbulence-squeeze-of.html and earlier http://cmpassocregulationblog.blogspot.com/2015/01/exchange-rate-conflicts-squeeze-of.html and earlier http://cmpassocregulationblog.blogspot.com/2014/12/patience-on-interest-rate-increases.html and earlier http://cmpassocregulationblog.blogspot.com/2014/11/squeeze-of-economic-activity-by-carry.html and earlier http://cmpassocregulationblog.blogspot.com/2014/10/imf-view-squeeze-of-economic-activity.html and earlier http://cmpassocregulationblog.blogspot.com/2014/09/world-inflation-waves-squeeze-of.html)

The United States economy has grown at the average yearly rate of 3 percent per year and 2 percent per year in per capita terms from 1870 to 2010, as measured by Lucas (2011May). An important characteristic of the economic cycle in the US has been rapid growth in the initial phase of expansion after recessions. Inferior performance of the US economy and labor markets is the critical current issue of analysis and policy design. Long-term economic performance in the United States consisted of trend growth of GDP at 3 percent per year and of per capita GDP at 2 percent per year as measured for 1870 to 2010 by Robert E Lucas (2011May). The economy returned to trend growth after adverse events such as wars and recessions. The key characteristic of adversities such as recessions was much higher rates of growth in expansion periods that permitted the economy to recover output, income and employment losses that occurred during the contractions. Over the business cycle, the economy compensated the losses of contractions with higher growth in expansions to maintain trend growth of GDP of 3 percent and of GDP per capita of 2 percent. The US maintained growth at 3.0 percent on average over entire cycles with expansions at higher rates compensating for contractions. US economic growth has been at only 2.1 percent on average in the cyclical expansion in the 43 quarters from IIIQ2009 to IQ2020 and in the global recession with output in the US reaching a high in Feb 2020 (https://www.nber.org/cycles.html), in the lockdown of economic activity in the COVID-19 event. Boskin (2010Sep) measures that the US economy grew at 6.2 percent in the first four quarters and 4.5 percent in the first 12 quarters after the trough in the second quarter of 1975; and at 7.7 percent in the first four quarters and 5.8 percent in the first 12 quarters after the trough in the first quarter of 1983 (Professor Michael J. Boskin, Summer of Discontent, Wall Street Journal, Sep 2, 2010 http://professional.wsj.com/article/SB10001424052748703882304575465462926649950.html). There are new calculations using the revision of US GDP and personal income data since 1929 by the Bureau of Economic Analysis (BEA) (http://bea.gov/iTable/index_nipa.cfm) and the third estimate of GDP for IQ2020 (https://www.bea.gov/sites/default/files/2020-06/gdp1q20_3rd.pdf). The average of 7.7 percent in the first four quarters of major cyclical expansions is in contrast with the rate of growth in the first four quarters of the expansion from IIIQ2009 to IIQ2010 of only 2.8 percent obtained by dividing GDP of $15,557.3 billion in IIQ2010 by GDP of $15,134.1 billion in IIQ2009 {[($15,557.3/$15,134.1) -1]100 = 2.8%], or accumulating the quarter on quarter growth rates (https://cmpassocregulationblog.blogspot.com/2020/06/mediocre-cyclical-united-states.html and earlier https://cmpassocregulationblog.blogspot.com/2020/05/mediocre-cyclical-united-states_31.html). The expansion from IQ1983 to IQ1986 was at the average annual growth rate of 5.7 percent, 5.3 percent from IQ1983 to IIIQ1986, 5.1 percent from IQ1983 to IVQ1986, 5.0 percent from IQ1983 to IQ1987, 5.0 percent from IQ1983 to IIQ1987, 4.9 percent from IQ1983 to IIIQ1987, 5.0 percent from IQ1983 to IVQ1987, 4.9 percent from IQ1983 to IIQ1988, 4.8 percent from IQ1983 to IIIQ1988, 4.8 percent from IQ1983 to IVQ1988, 4.8 percent from IQ1983 to IQ1989, 4.7 percent from IQ1983 to IIQ1989, 4.6 percent from IQ1983 to IIIQ1989, 4.5 percent from IQ1983 to IVQ1989. 4.5 percent from IQ1983 to IQ1990, 4.4 percent from IQ1983 to IIQ1990, 4.3 percent from IQ1983 to IIIQ1990, 4.0 percent from IQ1983 to IVQ1990, 3.8 percent from IQ1983 to IQ1991, 3.8 percent from IQ1983 to IIQ1991, 3.8 percent from IQ1983 to IIIQ1991, 3.7 percent from IQ1983 to IVQ1991, 3.7 percent from IQ1983 to IQ1992, 3.7 percent from IQ1983 to IIQ1992, 3.7 percent from IQ1983 to IIIQ2019, 3.8 percent from IQ1983 to IVQ1992, 3.7 percent from IQ1983 to IQ1993, 3.6 percent from IQ1983 to IIQ1993, 3.6 percent from IQ1983 to IIIQ1993 and at 7.9 percent from IQ1983 to IVQ1983 (https://cmpassocregulationblog.blogspot.com/2020/06/mediocre-cyclical-united-states.html and earlier https://cmpassocregulationblog.blogspot.com/2020/05/mediocre-cyclical-united-states_31.html). The National Bureau of Economic Research (NBER) dates a contraction of the US from IQ1990 (Jul) to IQ1991 (Mar) (https://www.nber.org/cycles.html). The expansion lasted until another contraction beginning in IQ2001 (Mar). US GDP contracted 1.3 percent from the pre-recession peak of $8983.9 billion of chained 2009 dollars in IIIQ1990 to the trough of $8865.6 billion in IQ1991 (https://apps.bea.gov/iTable/index_nipa.cfm). The US maintained growth at 3.0 percent on average over entire cycles with expansions at higher rates compensating for contractions. Growth at trend in the entire cycle from IVQ2007 to IQ2020 and in the global recession with output in the US reaching a high in Feb 2020 (https://www.nber.org/cycles.html), in the lockdown of economic activity in the COVID-19 event would have accumulated to 43.6 percent. GDP in IQ2020 would be $22,634.2 billion (in constant dollars of 2012) if the US had grown at trend, which is higher by $3656.8 billion than actual $18,977.4 billion. There are more than three trillion dollars of GDP less than at trend, explaining the 41.3 million unemployed or underemployed equivalent to actual unemployment/underemployment of 23.9 percent of the effective labor force with the largest part originating in the global recession with output in the US reaching a high in Feb 2020 (https://www.nber.org/cycles.html), in the lockdown of economic activity in the COVID-19 event (Section I and earlier https://cmpassocregulationblog.blogspot.com/2020/06/creation-of-three-million-private.html). Unemployment is decreasing while employment is increasing in initial adjustment of the lockdown of economic activity in the global recession resulting from the COVID-19 event (https://www.bls.gov/cps/employment-situation-covid19-faq-june-2020.pdf). US GDP in IQ2020 is 16.2 percent lower than at trend. US GDP grew from $15,762.0 billion in IVQ2007 in constant dollars to $18,977.4 billion in IQ2020 or 20.4 percent at the average annual equivalent rate of 1.5 percent. Professor John H. Cochrane (2014Jul2) estimates US GDP at more than 10 percent below trend. Cochrane (2016May02) measures GDP growth in the US at average 3.5 percent per year from 1950 to 2000 and only at 1.76 percent per year from 2000 to 2015 with only at 2.0 percent annual equivalent in the current expansion. Cochrane (2016May02) proposes drastic changes in regulation and legal obstacles to private economic activity. The US missed the opportunity to grow at higher rates during the expansion and it is difficult to catch up because growth rates in the final periods of expansions tend to decline. The US missed the opportunity for recovery of output and employment always afforded in the first four quarters of expansion from recessions. Zero interest rates and quantitative easing were not required or present in successful cyclical expansions and in secular economic growth at 3.0 percent per year and 2.0 percent per capita as measured by Lucas (2011May). There is cyclical uncommonly slow growth in the US instead of allegations of secular stagnation. There is similar behavior in manufacturing. There is classic research on analyzing deviations of output from trend (see for example Schumpeter 1939, Hicks 1950, Lucas 1975, Sargent and Sims 1977). The long-term trend is growth of manufacturing at average 2.9 percent per year from May 1919 to May 2020. Growth at 2.9 percent per year would raise the NSA index of manufacturing output (SIC, Standard Industrial Classification) from 108.2987 in Dec 2007 to 154.4475 in May 2020. The actual index NSA in May 2020 is 87.3585 which is 43.4 percent below trend. The underperformance of manufacturing in May 2020 originates partly in the earlier global recession augmented by the current global recession with output in the US reaching a high in Feb 2020 (https://www.nber.org/cycles.html), in the lockdown of economic activity in the COVID-19. Manufacturing grew at the average annual rate of 3.3 percent between Dec 1986 and Dec 2006. Growth at 3.3 percent per year would raise the NSA index of manufacturing output (SIC, Standard Industrial Classification) from 108.2987 in Dec 2007 to 162.0699 in May 2020. The actual index NSA in May 2020 is 87.3585, which is 46.1 percent below trend. Manufacturing output grew at average 1.4 percent between Dec 1986 and May 2020. Using trend growth of 1.4 percent per year, the index would increase to 128.7047 in May 2020. The output of manufacturing at 87.3585 in May 2020 is 32.1 percent below trend under this alternative calculation. Using the NAICS (North American Industry Classification System), manufacturing output fell from the high of 110.5147 in Jun 2007 to the low of 86.3800 in Apr 2009 or 21.8 percent. The NAICS manufacturing index increased from 86.3800 in Apr 2009 to 88.2710 in May 2020 or 2.2 percent. The NAICS manufacturing index increased at the annual equivalent rate of 3.5 percent from Dec 1986 to Dec 2006. Growth at 3.5 percent would increase the NAICS manufacturing output index from 106.6777 in Dec 2007 to 163.5246 in May 2020. The NAICS index at 88.2710 in May 2020 is 46.0 below trend. The NAICS manufacturing output index grew at 1.7 percent annual equivalent from Dec 1999 to Dec 2006. Growth at 1.7 percent would raise the NAICS manufacturing output index from 106.6777 in Dec 2007 to 131.5151 in May 2020. The NAICS index at 88.2710 in May 2020 is 32.9 percent below trend under this alternative calculation.

Table IB-1, US, Percentage Change from Prior Month Seasonally Adjusted of Personal Income, Disposable Income and Personal Consumption Expenditures %

NPI

NDPI

RDPI

NPCE

RPCE

May 2020

-4.2

-4.9

-5.0

8.2

8.1

AE ∆% May

-40.2

-45.2

-46.0

157.4

154.6

Apr

10.8

13.1

13.6

-12.6

-12.2

Mar

-2.2

-2.1

-1.8

-6.6

-6.4

AE ∆% Mar-Apr

61.9

84.3

92.7

-70.4

-69.2

Feb

0.5

0.5

0.4

0.0

-0.1

Jan

0.6

0.6

0.5

0.4

0.3

AE ∆% Jan-Feb

6.8

6.8

5.5

2.4

1.2

Dec 2019

0.2

0.2

-0.1

0.4

0.1

Nov

0.5

0.5

0.4

0.3

0.2

Oct

0.2

0.1

-0.1

0.3

0.1

AE ∆% Oct-Dec

3.7

3.2

0.8

4.1

1.6

Sep

0.2

0.3

0.3

0.2

0.2

Aug

0.4

0.5

0.5

0.3

0.2

AE ∆% Aug-Sep

3.7

4.9

4.9

3.0

2.4

Jul

0.0

0.2

-0.1

0.5

0.3

AE ∆% Jul

0.0

2.4

-1.2

6.2

3.7

Jun

0.4

0.4

0.2

0.3

0.2

May

0.2

0.2

0.1

0.4

0.3

Apr

0.3

0.3

0.0

0.7

0.4

AE ∆% Apr-Jun

3.7

3.7

1.2

5.7

3.7

Mar

0.4

0.4

0.2

1.0

0.8

Feb

0.6

0.5

0.4

-0.1

-0.2

AE ∆% Feb-Mar

6.2

5.5

3.7

5.5

3.6

Jan

0.3

0.0

0.1

0.6

0.6

AE ∆% Jan

3.7

0.0

1.2

7.4

7.4

Dec 2018

0.9

1.0

0.9

-0.8

-0.9

AE ∆% Dec

11.4

12.7

11.4

-9.2

-10.3

Nov

0.2

0.2

0.1

0.3

0.3

AE ∆% Nov

2.4

2.4

1.2

3.7

3.7

Oct

0.3

0.4

0.2

0.6

0.4

Sep

0.0

0.1

0.0

0.1

0.0

Aug

0.4

0.4

0.4

0.4

0.3

AE ∆% Aug-Oct

2.8

3.7

2.4

4.5

2.8

Jul

0.5

0.5

0.3

0.5

0.4

Jun

0.4

0.5

0.3

0.4

0.2

May

0.4

0.4

0.2

0.7

0.4

AE ∆% May-Jul

5.3

5.7

3.2

6.6

4.1

Apr

0.3

0.3

0.1

0.6

0.4

Mar

0.4

0.5

0.4

0.5

0.3

Feb

0.4

0.4

0.3

0.1

-0.1

AE ∆% Feb-Apr

4.5

4.9

3.2

4.9

2.4

Jan

0.8

1.3

1.0

0.2

-0.1

Dec 2017

0.6

0.6

0.4

0.6

0.4

AE ∆% Dec-Jan

8.7

12.0

8.7

4.9

1.8

Nov

0.6

0.5

0.3

0.6

0.4

AE ∆% Nov-

7.4

6.3

3.7

8.7

4.9

Oct

0.6

0.5

0.3

0.4

0.2

Sep

0.7

0.6

0.3

0.9

0.6

AE ∆% Sep-Oct

8.1

6.8

3.7

8.1

4.9

Aug

0.4

0.4

0.2

0.3

0.1

Jul

0.4

0.4

0.3

0.2

0.1

AE ∆% Jul-Aug

4.9

4.9

3.0

3.0

1.2

Jun

0.1

0.0

-0.1

0.4

0.3

AE ∆% Jun

1.2

0.0

-1.2

4.9

3.7

May

0.4

0.4

0.4

0.1

0.1

Apr

0.2

0.2

-0.1

0.3

0.1

Mar

0.4

0.4

0.5

0.4

0.5

AE ∆% Mar-May

4.1

4.1

3.2

3.2

2.8

Feb

0.5

0.5

0.4

0.1

0.0

Jan

0.8

1.0

0.6

0.4

0.1

AE ∆% Jan-Feb

8.1

9.4

6.2

3.0

0.6

Dec 2016

0.4

0.4

0.1

0.6

0.4

Nov

0.2

0.2

0.2

0.2

0.2

AE ∆% Nov-Dec

3.7

3.7

2.4

4.9

3.7

Oct

0.4

0.4

0.2

0.3

0.1

Sep

0.4

0.4

0.3

0.5

0.4

Aug

0.3

0.3

0.1

0.3

0.1

AE ∆% Aug-Oct

4.5

4.5

2.4

4.5

2.4

Jul

0.4

0.4

0.3

0.1

0.0

Jun

0.3

0.2

0.0

0.7

0.5

May

0.1

0.1

-0.1

0.4

0.2

AE ∆% May-Jul

3.2

2.8

0.8

4.9

2.8

Apr

0.2

0.2

-0.2

0.7

0.4

Mar

0.3

0.3

0.1

-0.1

-0.2

AE ∆% Mar-Apr

3.0

3.0

-0.6

4.9

1.2

Feb

0.0

0.0

0.1

0.6

0.6

Jan

0.2

0.5

0.4

0.2

0.2

AE ∆% Jan-Feb

1.2

3.0

3.0

4.9

4.9

2015

Dec

0.2

0.3

0.3

0.2

0.3

Nov

-0.1

-0.1

-0.1

0.3

0.2

Oct

0.1

0.1

0.1

0.0

0.0

Sep

0.1

0.1

0.2

0.0

0.1

AE ∆% Sep-Dec

0.9

1.2

1.5

1.5

1.8

Aug

0.2

0.2

0.2

0.2

0.2

Jul

0.3

0.3

0.2

0.5

0.4

Jun

0.4

0.4

0.2

0.3

0.1

AE ∆% Jun-Aug

3.7

3.7

2.4

4.1

2.8

May

0.6

0.6

0.4

0.6

0.4

Apr

0.6

0.6

0.5

0.3

0.3

Mar

0.0

-0.1

-0.3

0.5

0.2

AE ∆% Mar-Jun

4.9

4.5

2.4

5.7

3.7

Feb

0.5

0.4

0.3

0.4

0.2

Jan

0.3

0.0

0.5

-0.2

0.3

AE ∆% Jan-Feb

4.9

2.4

4.9

1.2

3.0

2014

Dec

0.5

0.5

0.6

0.1

0.3

Nov

0.4

0.4

0.5

0.3

0.3

Oct

0.4

0.4

0.4

0.6

0.6

Sep

0.4

0.3

0.3

0.1

0.1

AE ∆% Sep-Dec

5.2

4.9

5.5

3.3

4.0

Aug

0.5

0.5

0.5

0.7

0.7

Jul

0.5

0.5

0.3

0.4

0.2

Jun

0.6

0.6

0.5

0.5

0.4

May

0.5

0.5

0.4

0.4

0.2

Apr

0.5

0.6

0.4

0.5

0.4

AE ∆% Apr-Aug

6.4

6.7

5.2

6.2

4.7

Mar

0.7

0.7

0.5

0.6

0.4

Feb

0.7

0.7

0.6

0.6

0.6

Jan

0.7

0.7

0.5

-0.1

-0.3

AE ∆% Jan-Mar

8.7

8.7

6.6

4.5

2.8

2013

Dec

0.6

0.5

0.3

0.3

0.1

AE ∆% Dec

7.4

6.2

3.7

3.7

1.2

Nov

0.5

0.5

0.3

0.6

0.4

AE ∆% Nov

6.2

6.2

3.7

7.4

4.9

Oct

-0.1

-0.1

-0.3

0.5

0.3

AE ∆% Oct

-1.2

-1.2

-3.5

6.2

3.7

Sep

0.4

0.4

0.4

0.3

0.3

Aug

0.3

0.4

0.2

0.3

0.1

Jul

-0.1

0.0

-0.1

0.2

0.1

Jun

0.3

0.3

0.1

0.2

0.0

May

0.6

0.6

0.6

0.4

0.3

Apr

0.4

0.3

0.4

-0.2

-0.1

AE ∆% Apr-Sep

3.9

4.1

3.2

2.4

1.4

Mar

0.1

0.0

0.2

-0.1

0.0

Feb

-0.1

-0.1

-0.5

0.3

0.0

AE ∆% Feb-Mar

0.0

-0.6

-1.8

1.2

0.0

Jan

-4.7

-5.6

-5.8

0.6

0.4

AE ∆% Jan

-43.9

-49.9 (3.7)a

-51.2

7.4

4.9

2012

∆% Jan-Dec 2012***

8.3

8.3

6.5

3.4

1.7

Dec

2.6

2.5 (0.3)*

2.5 (0.5)*

0.0

0.0

Nov

1.4

1.3 (0.6)*

1.4 (0.9)*

0.3

0.4

AE ∆% Nov-Dec

26.8

25.3 (5.5)*

26.1 (8.7)*

1.8

2.4

Oct

1.0

1.1

0.8

0.3

0.1

Sep

0.9

0.8

0.5

0.5

0.2

Aug

0.0

-0.1

-0.4

0.2

-0.1

AE ∆% Aug-Oct

7.9

7.4

3.6

4.1

0.8

Jul

-0.6

-0.7

-0.7

0.3

0.2

Jun

0.1

0.0

0.1

-0.2

-0.1

May

0.0

0.0

0.1

-0.1

0.0

Apr

0.5

0.5

0.4

0.3

0.1

AE ∆% Apr-Jul

0.0

-0.6

-0.3

0.9

0.6

Mar

0.5

0.5

0.4

0.0

-0.2

Feb

0.9

0.8

0.6

0.8

0.6

Jan

0.8

1.1

0.7

0.8

0.5

AE ∆% Jan-Mar

9.2

10.0

7.0

6.6

3.7

2011

∆% Jan-Dec 2011*

5.2

4.3

1.6

3.7

1.0

Dec

1.0

1.0

0.9

0.1

0.1

Nov

0.1

0.2

0.0

0.1

-0.1

Oct

0.1

0.2

0.2

0.1

0.1

Sep

0.0

0.0

-0.2

0.4

0.2

AE ∆% Sep-Dec

3.6

4.3

2.7

2.1

0.9

Aug

0.1

0.1

-0.1

0.2

0.0

Jul

0.5

0.5

0.3

0.4

0.2

Jun

0.5

0.5

0.5

0.2

0.3

May

0.2

0.2

-0.1

0.2

-0.1

AE ∆% May-Aug

4.0

4.0

1.8

3.0

1.2

Apr

0.2

0.2

-0.2

0.4

-0.1

Mar

0.1

0.1

-0.3

0.8

0.4

Feb

0.5

0.5

0.2

0.3

0.0

Jan

1.6

0.7

0.4

0.4

0.1

AE ∆% Jan-Apr

7.4

4.6

0.3

5.8

1.2

2010

∆% Jan-Dec 2010**

5.8

5.0

3.6

3.9

2.6

Dec

0.9

0.9

0.7

0.4

0.1

Nov

0.4

0.4

0.2

0.5

0.3

Oct

0.5

0.4

0.1

0.5

0.2

IVQ2010∆%

1.8

1.7

1.0

1.4

0.6

IVQ2010 AE ∆%

7.4

7.0

4.1

5.7

2.4

Notes: *Excluding exceptional income gains in Nov and Dec 2012 because of anticipated tax increases in Jan 2013 ((page 2 at http://www.bea.gov/newsreleases/national/pi/2013/pdf/pi1212.pdf). a Excluding employee contributions for government social insurance (pages 1-2 at http://www.bea.gov/newsreleases/national/pi/2013/pdf/pi0113.pdf ) Excluding NPI: current dollars personal income; NDPI: current dollars disposable personal income; RDPI: chained (2005) dollars DPI; NPCE: current dollars personal consumption expenditures; RPCE: chained (2005) dollars PCE; AE: annual equivalent; IVQ2010: fourth quarter 2010; A: annual equivalent

Percentage change month to month seasonally adjusted

*∆% Dec 2011/Dec 2010 **∆% Dec 2010/Dec 2009 *** ∆% Dec 2012/Dec 2011

Source: US Bureau of Economic http://bea.gov/iTable/index_nipa.cfm

The 12-month rate of increase of real disposable income fell to minus 1.0 percent in Oct 2013 and minus 2.1 percent in Nov 2013 partly because of the much higher level in late 2012 in anticipation of incomes to avoid increases in taxes in 2013. Real disposable income fell 4.2 percent in the 12 months ending in Dec 2013 primarily because of the much higher level in late 2012 in anticipation of income to avoid increases in taxes in 2013. Real disposable income increased 2 percent in the 12 months ending in Jan 2014, partly because of the low level in Jan 2013 after anticipation of incomes in late 2012 in avoiding the fiscal cliff episode. Real disposable income increased 8.2 percent in the 12 months ending in May 2020 in the global recession, with output in the US reaching a high in Feb 2020 (https://www.nber.org/cycles.html), in the lockdown of economic activity in the COVID-19 event. The BEA explains as follows (https://www.bea.gov/sites/default/files/2020-06/pi0520_0.pdf): “The May estimate for personal income and outlays was impacted by the response to the spread

of COVID-19. Federal economic recovery payments continued but were at a lower level than in

April, and government “stay-at-home” orders were partially lifted in May. The full economic

effects of the COVID-19 pandemic cannot be quantified in the personal income and outlays

estimate for May because the impacts are generally embedded in source data and cannot be

separately identified. For more information, see the “highlights” file and the Effects of Selected

Federal Pandemic Response Programs on Personal Income table.”

RPCE growth decelerated sharply from close to 3 percent in IVQ2010 to minus 9.8 percent in May 2020. Subdued growth of RPCE could affect revenues of business. Growth rates of personal consumption have weakened in oscillations. Goods and especially durable goods have been driving growth of PCE as shown by the much higher 12-month rates of growth of real goods PCE (RPCEG) and durable goods real PCE (RPCEGD) than services real PCE (RPCES). Growth of consumption of goods and, in particular, of consumer durable goods drives the faster expansion of the economy while growth of consumption of services is much more moderate. The 12-month rates of growth of RPCEGD have fallen from around 10 percent and even higher in several months from Sep 2010 to Feb 2011 to the range of minus 19.2 to 8.4 percent from May 2019 to May 2020. RPCEG growth rates have fallen from around 5 percent late in 2010 and early Jan-Feb 2011 to the range of minus 16.3 to 5.4 percent from May 2019 to May 2020. In May 2020, RPCEG increased 0.4 percent in 12 months and RPCEGD increased 2.4 percent while RPCES decreased 14.3 percent. There are limits to sustained growth based on financial repression in an environment of weak labor markets and real labor remuneration.

Table IB-2, Real Disposable Personal Income and Real Personal Consumption Expenditures

Percentage Change from the Same Month a Year Earlier %

RDPI

RPCE

RPCEG

RPCEGD

RPCES

2020

May

8.2

-9.8

0.4

2.4

-14.3

Apr

14.0

-16.3

-11.5

-19.2

-18.4

Mar

0.3

-4.3

2.0

-8.6

-7.0

Feb

2.4

3.1

4.7

7.3

2.3

Jan

2.4

3.0

4.2

7.6

2.4

2019

Dec

2.0

3.3

5.4

8.4

2.4

Nov

3.0

2.3

2.9

4.6

2.1

Oct

2.7

2.3

3.6

4.8

1.8

Sep

3.0

2.7

4.4

6.2

1.9

Aug

2.6

2.5

4.1

5.0

1.7

Jul

2.5

2.6

4.2

5.4

1.8

Jun

2.9

2.6

4.1

4.6

1.9

May

3.0

2.6

3.4

4.6

2.3

Apr

3.1

2.7

3.8

4.1

2.2

Mar

3.3

2.8

3.9

5.0

2.3

Feb

3.4

2.3

2.1

1.7

2.4

Jan

3.2

2.4

3.0

3.0

2.2

2018

Dec

4.2

1.7

0.9

1.1

2.0

Nov

3.7

3.0

4.0

5.1

2.6

Oct

3.8

3.2

3.9

5.0

2.9

Sep

4.0

3.1

3.6

5.2

2.8

Aug

4.3

3.7

4.9

7.8

3.2

Jul

4.1

3.5

4.7

6.4

3.0

Jun

4.1

3.2

4.1

7.0

2.8

May

3.7

3.3

5.2

8.2

2.4

Apr

3.9

3.0

4.2

7.4

2.4

Mar

3.8

2.6

4.3

7.4

1.9

Feb

3.9

2.8

4.6

7.5

2.0

Jan

4.0

2.9

4.7

7.5

2.0

2017

Dec

3.6

3.0

5.0

7.1

2.2

Nov

3.3

3.0

5.6

9.1

1.9

Oct

3.2

2.8

4.5

7.1

2.0

Sep

3.1

2.6

4.3

7.1

1.8

Aug

3.1

2.3

3.5

5.5

1.8

Jul

3.0

2.3

3.2

5.9

1.9

Jun

3.0

2.3

3.2

6.2

1.8

May

3.2

2.5

3.6

7.0

2.0

Apr

2.6

2.6

4.1

7.5

2.0

Mar

2.5

2.9

3.7

7.0

2.5

Feb

2.1

2.1

2.8

5.8

1.8

Jan

1.8

2.8

3.7

7.4

2.3

2016

Dec

1.6

2.8

3.8

8.1

2.4

Nov

1.8

2.7

3.1

5.9

2.6

Oct

1.5

2.8

4.1

8.1

2.2

Sep

1.3

2.7

3.6

7.2

2.3

Aug

1.3

2.5

3.3

5.7

2.1

Jul

1.4

2.6

3.7

6.4

2.1

Jun

1.3

3.0

4.4

6.5

2.3

May

1.5

2.6

3.3

4.4

2.2

Apr

2.0

2.7

3.3

4.3

2.4

Mar

2.7

2.6

3.1

4.3

2.4

Feb

2.3

3.1

4.4

7.0

2.5

Jan

2.5

2.7

3.5

5.3

2.4

2015

Dec

2.6

2.8

3.8

5.8

2.4

Nov

2.8

2.8

3.8

5.9

2.4

Oct

3.5

2.9

3.6

5.7

2.6

Sep

3.9

3.5

4.8

6.5

2.9

Aug

3.9

3.5

4.5

7.3

3.0

Jul

4.2

3.9

5.0

7.7

3.5

Jun

4.3

3.8

4.5

6.8

3.4

May

4.5

4.1

5.1

8.0

3.7

Apr

4.5

4.0

4.8

8.5

3.6

Mar

4.4

4.1

5.1

7.9

3.6

Feb

5.3

4.2

4.9

8.5

3.9

Jan

5.6

4.6

6.6

11.5

3.6

2014

Dec

5.6

3.9

5.4

10.0

3.3

Nov

5.3

3.7

4.9

8.9

3.1

Oct

5.1

3.8

4.9

8.7

3.3

Sep

4.4

3.5

4.5

8.8

3.0

Aug

4.5

3.7

5.2

8.6

3.0

Jul

4.2

3.2

4.2

7.6

2.7

Jun

3.8

3.0

4.5

8.2

2.3

May

3.4

2.6

3.7

7.1

2.1

Apr

3.6

2.7

4.3

6.5

1.9

Mar

3.6

2.2

3.8

7.1

1.5

Feb

3.2

1.8

2.7

3.8

1.4

Jan

2.1

1.2

0.8

1.1

1.4

2013

Dec

-4.2

1.9

3.1

3.4

1.3

Nov

-2.1

1.9

3.5

5.1

1.1

Oct

-1.0

1.8

3.9

6.6

0.9

Sep

0.0

1.6

3.3

5.2

0.7

Aug

0.0

1.5

2.9

6.5

0.8

Jul

-0.6

1.3

3.6

7.0

0.2

Jun

-1.1

1.4

3.3

7.0

0.5

May

-1.2

1.2

3.1

7.0

0.3

Apr

-1.6

1.0

2.5

6.1

0.2

Mar

-1.7

1.2

2.6

5.8

0.6

Feb

-1.5

1.0

2.4

6.1

0.3

Jan

-0.4

1.6

3.6

7.5

0.7

2012

Dec

6.5

1.7

2.9

7.6

1.2

Nov

4.8

1.8

2.7

7.3

1.3

Oct

3.3

1.2

1.6

4.2

1.0

Sep

2.7

1.3

2.3

6.3

0.8

Aug

2.1

1.3

2.8

6.8

0.5

Jul

2.3

1.3

2.2

6.3

0.9

Jun

3.4

1.3

1.8

6.7

1.0

May

3.8

1.7

2.6

6.1

1.3

Apr

3.6

1.6

1.7

5.4

1.6

Mar

3.0

1.4

1.4

4.5

1.4

Feb

2.3

2.0

2.4

6.3

1.8

Jan

1.9

1.4

1.1

4.5

1.5

Dec 2011

1.6

1.0

0.8

3.6

1.1

Dec 2010

3.6

2.6

4.1

8.3

1.8

Notes: RDPI: real disposable personal income; RPCE: real personal consumption expenditures (PCE); RPCEG: real PCE goods; RPCEGD: RPCEG durable goods; RPCES: RPCE services

Numbers are percentage changes from the same month a year earlier

Source: US Bureau of Economic Analysis https://apps.bea.gov/iTable/index_nipa.cfm

Chart IB-1 shows US real personal consumption expenditures (RPCE) between 2002 and 2020. There is an evident drop in RPCE during the global recession in 2007 to 2009 but the slope is flatter during the current recovery than in the period before 2007 with recent recovery. The final data point in IQ2020 shows sharp drop in the global recession, with output in the US reaching a high in Feb 2020 (https://www.nber.org/cycles.html), in the lockdown of economic activity in the COVID-19 event.

clip_image005

Chart IB-1, US, Real Personal Consumption Expenditures, Quarterly Seasonally Adjusted at Annual Rates 2002-2020

Source: US Bureau of Economic Analysis

https://apps.bea.gov/iTable/index_nipa.cfm

Percent changes from the prior period in seasonally adjusted annual equivalent quarterly rates (SAAR) of real personal consumption expenditures (RPCE) are in Chart IB-2 from 1995 to 2020. The average rate could be visualized as a horizontal line. Although there are not yet sufficient observations, it appears from Chart IB-2 that the average rate of growth of RPCE was higher before the recession than during the forty-one quarters of expansion that began in IIIQ2009. The final data point in IQ2020 shows sharp contraction in the global recession, with output in the US reaching a high in Feb 2020 (https://www.nber.org/cycles.html), in the lockdown of economic activity in the COVID-19 event.

clip_image007

Chart IB-2, Percent Change from Prior Period in Real Personal Consumption Expenditures, Quarterly Seasonally Adjusted at Annual Rates 1995-2020

Source: US Bureau of Economic Analysis

https://apps.bea.gov/iTable/index_nipa.cfm

Personal income and its disposition are in Table IB-3. The latest estimates and revisions have changed movements in eleven forms. (1) Decrease in May 2020 of personal income by $874.2 billion or 4.2 percent and decrease of disposable income of $911.1 billion or 4.9 percent with increase of wages and salaries of 2.7 percent in the lockdown of economic activity in the global recession, with output in the US reaching a high in Feb 2020 (https://www.nber.org/cycles.html), in the lockdown of economic activity in the COVID-19 event. The BEA explains as follows (https://www.bea.gov/sites/default/files/2020-06/pi0520_0.pdf): “The May estimate for personal income and outlays was impacted by the response to the spread

of COVID-19. Federal economic recovery payments continued but were at a lower level than in

April, and government “stay-at-home” orders were partially lifted in May. The full economic

effects of the COVID-19 pandemic cannot be quantified in the personal income and outlays

estimate for May because the impacts are generally embedded in source data and cannot be

separately identified. For more information, see the “highlights” file and the Effects of Selected

Federal Pandemic Response Programs on Personal Income table.” (2) Increase of personal income of $701.1 billion from Dec 2018 to Dec 2019 or 3.9 percent and increase of disposable income of $572.0 billion or 3.5 percent with increase of wages and salaries of 4.9 percent. (3) Increase of personal income of $870.8 billion from Dec 2017 to Dec 2018 or 5.0 percent and increase of disposable income of $920.3 billion or 6.1 percent with increase of wages and salaries of 3.6 percent. (4) Increase of personal income of $937.5 billion from Dec 2016 to Dec 2017 or 5.7 percent and increase of disposable income of $801.2 billion or 5.6 percent with increase of wages and salaries of 5.6 percent. (5) Increase of personal income of $498.7 billion or 3.1 percent from Dec 2015 to Dec 2016 and increase of disposable income of $461.4 billion or 3.3 percent. Wages and salaries increased $271.4 billion or 3.4 percent. (6) Increase of personal income of $531.1 billion from Dec 2014 to Dec 2015 or 3.3 percent and increase of disposable income of $399.4 billion or 2.9 percent. Wages and salaries increased $300.4 billion or 3.9 percent. (7) Increase of personal income of $950.8 billion from Dec 2013 to Dec 2014 or 6.6 percent while disposable income increased $814.4 billion or 6.4 percent. Wages and salaries increased $424.9 billion or 5.9 percent. (8) Decrease of personal income of $266.5 billion from Dec 2012 to Dec 2013 or by 1.8 percent and decrease of disposable income of $372.3 billion or by 2.8 percent. Wages and salaries increased $55.9 billion from Dec 2012 to Dec 2013 or by 0.8 percent. Large part of these declines occurred because of the comparison of high levels in late 2012 in anticipation of tax increases in 2013. (9) In 2012, personal income increased $1128.7 billion or 8.3 percent while wages and salaries increased 7.6 percent and disposable income 8.3 percent. Significant part of these gains occurred in Dec 2012 in anticipation of incomes because of tax increases beginning in Jan 2013. (10) Increase of $672.2 billion of personal income in 2011 or by 5.2 percent with increase of wages and salaries of 2.7 percent and disposable income of 4.3 percent. (11) Increase of the rate of savings as percent of disposable income from 7.1 percent in Dec 2010 to 7.8 percent in Dec 2011 and 12.0 percent in Dec 2012, decreasing to 6.4 percent in Dec 2013. The savings rate increased to 7.7 percent in Dec 2014, decreasing to 7.4 percent in Dec 2015, 6.3 percent in Dec 2016, 6.7 percent in Dec 2017 and increasing to 8.8 percent in Dec 2018. The savings ratio decreased to 7.7 percent in Dec 2019. The savings ratio increased to 23.2 percent in Apr 2020 in the global recession, with output in the US reaching a high in Feb 2020 (https://www.nber.org/cycles.html), in the lockdown of economic activity in the COVID-19 event.

Table IB-3, US, Personal Income and its Disposition, Seasonally Adjusted at Annual Rates USD Billions

Personal
Income

Wages &
Salaries

Personal
Taxes

DPI

Savings
Rate %

May 2020

19,839.3

8,733.3

2,051.8

17,787.5

23.2

Apr 2019

20,713.5

8,499.8

2,014.8

18,698.6

32.2

Change May 2020/     

Apr 2020

-874.2 ∆% -4.2

233.5

∆% 2.7

37.0 ∆%

1.8

911.1 ∆% -4.9

Dec 2019

18,906.6

9,459.1

2,212.6

16,694.0

7.7

Change Dec 2019/Dec 2018

701.1 ∆% 3.9

442.7 ∆% 4.9

129.2 ∆% 6.2

572.0 ∆% 3.5

Dec 2018

18,205.5

9,016.4

2,083.4

16,122.0

8.8

Change Dec 2018/Dec 2017

870.8 ∆% 5.0

315,8 ∆% 3.6

-49.6 ∆%

-2.3

920.3 ∆% 6.1

Dec 2017

17,334.7

8,700.6

2,133.0

15,201.7

6.7

Change Dec 2017/     

Dec 2016

937.5 ∆% 5.7

461.5 ∆% 5.6

136.3 ∆% 6.8

801.2 ∆% 5.6

Dec 2016

16,397.2

8,239.1

1,996.7

14,400.5

6.3

Dec 2015

15,898.5

7,967.7

1,959.3

13,939.1

7.4

Change Dec 2016/     

Dec 2015

498.7 ∆% 3.1

271.4 ∆% 3.4

37.4 ∆% 1.9

461.4 ∆% 3.3

Dec 2015

15,898.5

7,967.7

1,959.3

13,939.1

7.4

Change Dec 2015/Dec 2014

513.1 ∆%

3.3

300.4 ∆%

3.9

113.6 ∆%

6.2

399.4 ∆%

2.9

Dec 2014

15,385.4

7,667.3

1,845.7

13,539.7

7.7

Change Dec 2014/Dec 2013

950.8 ∆% 6.6

424.9 ∆% 5.9

132.4 ∆% 7.7

818.4 ∆% 6.4

Dec 2013

14,434.6

7,242.4

1,713.3

12,721.3

6.4

Dec 2012

14,701.1

7,186.5

1,607.6

13,093.6

12.0

Change Dec 2013/ Dec 2012

-266.5 ∆% -1.8

55.9 ∆% 0.8

105.7 ∆%

6.6

-372.3 ∆% -2.8

Change Dec 2012/ Dec 2011

1128.7 ∆% 8.3

508.9 ∆% 7.6

128.8 ∆% 8.7

1000.0 ∆% 8.3

Dec 2011

13,572.4

6,677.6

1,478.8

12,093.6

7.8

Dec 2010

12,900.2

6,500.6

1,299.8

11,600.4

7.1

Change Dec 2011/ Dec 2010

672.2 ∆%

5.2

177.0 ∆% 2.7

179.0 ∆% 13.8

493.2 ∆% 4.3

Source: US Bureau of Economic Analysis

https://apps.bea.gov/iTable/index_nipa.cfm

Table IB-4 provides growth rates of real disposable income and real disposable income per capita in the long-term and selected periods. Real disposable income consists of after-tax income adjusted for inflation. Real disposable income per capita is income per person after taxes and inflation. There is remarkable long-term trend of growth of real disposable income of 3.2 percent per year on average from 1929 to 2019 and 2.0 percent in real disposable income per capita. Real disposable income increased at the average yearly rate of 3.7 percent from 1947 to 1999 and real disposable income per capita at 2.3 percent. These rates of increase broadly accompany rates of growth of GDP. Institutional arrangements in the United States provided the environment for growth of output and income after taxes, inflation and population growth. There is significant break of growth by much lower 2.6 percent for real disposable income on average from 1999 to 2019 and 1.7 percent in real disposable per capita income. Real disposable income grew at 3.5 percent from 1980 to 1989 and real disposable per capita income at 2.6 percent. In contrast, real disposable income grew at only 2.2 percent on average from 2006 to 2019 and real disposable income per capita at 1.5 percent. Real disposable income grew at 2.2 percent from 2007 to 2019 and real disposable income per capita at 1.5 percent. The United States has interrupted its long-term and cyclical dynamism of output, income and employment growth. Recovery of this dynamism could prove to be a major challenge. Cyclical uncommonly slow growth explains weakness in the current whole cycle instead of the allegation of secular stagnation.

Table IB-4, Average Annual Growth Rates of Real Disposable Income (RDPI) and Real Disposable Income per Capita (RDPIPC), Percent per Year 

RDPI Average ∆%

     1929-2019

3.2

     1947-1999

3.7

     1999-2019

2.6

     1999-2006

3.2

     1980-1989

3.5

     2006-2019

2.2

2007-2019

2.2

RDPIPC Average ∆%

     1929-2019

2.0

     1947-1999

2.3

     1999-2019

1.7

     1999-2006

2.2

     1980-1989

2.6

     2006-2019

1.5

2007-2019

1.5

Source: Bureau of Economic Analysis https://apps.bea.gov/iTable/index_nipa.cfm

Chart IB-3 provides personal income in the US between 1980 and 1993. These data are not adjusted for inflation that was still high in the 1980s in the exit from the Great Inflation of the 1960s and 1970s (see http://cmpassocregulationblog.blogspot.com/2011/05/slowing-growth-global-inflation-great.html http://cmpassocregulationblog.blogspot.com/2011/04/new-economics-of-rose-garden-turned.html http://cmpassocregulationblog.blogspot.com/2011/03/is-there-second-act-of-us-great.html and Appendix I The Great Inflation; see Taylor 1993, 1997, 1998LB, 1999, 2012FP, 2012Mar27, 2012Mar28, 2012JMCB and http://cmpassocregulationblog.blogspot.com/2012/06/rules-versus-discretionary-authorities.html http://cmpassocregulationblog.blogspot.com/2014/07/financial-irrational-exuberance.html http://cmpassocregulationblog.blogspot.com/2014/07/world-inflation-waves-united-states.html). Personal income grew steadily during the 1980s after recovery from two recessions from Jan IQ1980 to Jul IIIQ1980 and from Jul IIIQ1981 to Nov IVQ1982. The National Bureau of Economic Research (NBER) dates a contraction of the US from IQ1990 (Jul) to IQ1991 (Mar) (https://www.nber.org/cycles.html). The expansion lasted until another contraction beginning in IQ2001 (Mar). US GDP contracted 1.3 percent from the pre-recession peak of $8983.9 billion of chained 2009 dollars in IIIQ1990 to the trough of $8865.6 billion in IQ1991 (https://apps.bea.gov/iTable/index_nipa.cfm).

clip_image009

Chart IB-3, US, Personal Income, Billion Dollars, Quarterly Seasonally Adjusted at Annual Rates, 1980-1993

Source: US Bureau of Economic Analysis

https://apps.bea.gov/iTable/index_nipa.cfm

Chart IB-4 provides personal income from 2007 to 2020. In IQ2013, personal income fell at the SAAR of minus 10.4 percent; real personal income excluding current transfer receipts at minus 11.9 percent; and real disposable personal income at minus 15.1 percent (Table 14 at https://www.bea.gov/system/files/2018-07/pi0618.pdf).The BEA explains as follows (page 3 at http://www.bea.gov/newsreleases/national/pi/2013/pdf/pi0313.pdf):

“The February and January changes in disposable personal income (DPI) mainly reflected the effect of special factors in January, such as the expiration of the “payroll tax holiday” and the acceleration of bonuses and personal dividends to November and to December in anticipation of changes in individual tax rates.”

In IIIQ2014, personal income grew at 6.3 percent, nominal disposable income at 5.9 percent and real disposable personal income at 4.4 percent (Table 14 at https://www.bea.gov/system/files/2019-07/pi0619.pdf). In IVQ2014, personal income grew at 5.3 percent in nominal terms while nominal disposable income grew at 4.9 percent in nominal terms and at 5.4 percent in real terms (Table 14 at https://www.bea.gov/system/files/2019-07/pi0619.pdf). In IQ2015, nominal personal income grew at 4.3 percent while nominal disposable income grew at 2.8 percent and at 4.6 percent in real terms (Table 14 at https://www.bea.gov/system/files/2019-07/pi0619.pdf). In IIQ2015, nominal personal income grew at 5.4 percent while nominal disposable income grew at 5.1 percent and real disposable income grew at 3.0 percent (Table 14 at https://www.bea.gov/system/files/2019-07/pi0619.pdf). In IIIQ2015, nominal personal income grew at 3.8 percent while nominal disposable income grew at 4.1 percent and real disposable income grew at 3.0 percent (Table 14 at https://www.bea.gov/system/files/2019-07/pi0619.pdf). In IVQ2015, nominal personal income grew at 1.2 percent while nominal disposable income grew at 0.9 percent and real disposable income at 1.3 percent (Table 14 at https://www.bea.gov/system/files/2019-07/pi0619.pdf). In IQ2016, personal income grew at 1.6 percent and fell at 2.1 percent excluding transfer receipts while nominal disposable income grew at 2.9 percent and real disposable income grew at 2.7 percent (Table 14 at https://www.bea.gov/system/files/2019-07/pi0619.pdf). In IIQ2016, personal income grew at 2.3 percent and at 2.2 percent excluding transfer receipts while nominal disposable income grew at 2.0 percent and real disposable income fell at 0.4 percent (Table 14 at https://www.bea.gov/system/files/2019-07/pi0619.pdf). In IIIQ2016, personal income grew at 3.7 percent and at 1.3 percent excluding transfer receipts while nominal disposable income grew at 3.5 percent and real disposable income grew at 1.8 percent (Table 14 at https://www.bea.gov/system/files/2019-07/pi0619.pdf). In IVQ2016, nominal personal income grew at 4.2 percent, decreasing at 2.6 percent excluding current transfers while disposable income grew at 4.3 percent and real disposable income increased at 2.4 percent (Table 14 at https://www.bea.gov/system/files/2019-07/pi0619.pdf). In IQ2017, nominal personal income grew at 6.6 percent and 4.7 percent excluding transfer receipts while nominal disposable income grew at 7.1 percent and real disposable income at 4.9 percent (Table 14 at https://www.bea.gov/system/files/2019-07/pi0619.pdf). In IIQ2017, nominal personal income grew at 3.6 percent and 2.4 percent excluding transfer receipts while nominal disposable income grew at 3.6 percent and real disposable income at 2.7 percent (Table 14 at https://www.bea.gov/system/files/2019-07/pi0619.pdf). In IIIQ2017, nominal personal income grew at 4.4 percent and at 2.5 percent excluding transfer receipts while nominal disposable income grew at 4.1 percent and real disposable personal income grew at 2.3 percent (Table 14 at https://www.bea.gov/system/files/2019-07/pi0619.pdf). In IVQ2017, nominal personal income grew at 7.3 percent and at 2.9 percent real excluding transfer receipts while nominal disposable income grew at 6.5 percent and real disposable personal income grew at 3.7 percent (Table 14 at https://www.bea.gov/system/files/2019-07/pi0619.pdf). In IQ2018, nominal personal income grew at 7.4 percent and at 4.6 percent real excluding transfer receipts while nominal disposable income grew at 9.6 percent and real disposable income grew at 6.9 percent (Table 6 at https://www.bea.gov/system/files/2019-09/pi0819.pdf). In IIQ2018, nominal personal income grew at 4.3 percent and at 2.1 percent real excluding transfer receipts while nominal disposable income grew at 4.9 percent and real disposable income grew at 2.7 percent (Table 6 at https://www.bea.gov/system/files/2019-12/pi1119.pdf). In IIIQ2018, nominal personal income grew at 4.7 percent and at 3.4 percent real excluding transfer receipts while nominal disposable income grew at 4.9 percent and real disposable income grew at 3.3 percent (Table 6 at https://www.bea.gov/system/files/2020-03/pi0220_1.pdf). In IVQ2018, nominal personal income grew at 3.5 percent and at 2.3 percent real excluding transfer receipts while nominal disposable income grew at 4.2 percent and real disposable income grew at 2.8 percent (Table 6 at https://www.bea.gov/sites/default/files/2020-06/pi0520_0.pdf). In IQ2019, nominal personal income grew at 6.2 percent and at 4.0 real percent excluding transfer receipts while nominal disposable income grew at 4.9 percent and real disposable income grew at 4.5 percent (Table 6 at https://www.bea.gov/sites/default/files/2020-06/pi0520_0.pdf). In IIQ2019, nominal personal income grew at 4.4 percent and at 1.7 real percent excluding transfer receipts while nominal disposable income grew at 3.9 percent and real disposable income grew at 1.5 percent (Table 6 at https://www.bea.gov/sites/default/files/2020-06/pi0520_0.pdf). In IIIQ2019, nominal personal income grew at 2.6 percent and at 0.7 real percent excluding transfer receipts while nominal disposable income grew at 3.6 percent and real disposable income grew at 2.1 percent (Table 6 at https://www.bea.gov/sites/default/files/2020-06/pi0520_0.pdf). In IVQ2019, nominal personal income grew at 3.7 percent and at 2.4 percent real excluding current transfers while nominal disposable income grew at 3.5 percent and real disposable income grew at 2.1 percent (Table 6 at https://www.bea.gov/sites/default/files/2020-06/pi0520_0.pdf). In IQ2020, nominal personal income grew at 2.1 percent and decreased at 1.0 percent real excluding current transfers while nominal disposable income grew at 2.2 percent and real disposable income grew at 0.9 percent (Table 6 at https://www.bea.gov/sites/default/files/2020-06/pi0520_0.pdf).

clip_image011

Chart IB-4, US, Personal Income, Current Billions of Dollars, Quarterly Seasonally Adjusted at Annual Rates, 2007-2020

Source: US Bureau of Economic Analysis

https://apps.bea.gov/iTable/index_nipa.cfm

Real or inflation-adjusted disposable personal income is in Chart IB-5 from 1980 to 1993. Real disposable income after allowing for taxes and inflation grew steadily at high rates during the entire decade. The National Bureau of Economic Research (NBER) dates a contraction of the US from IQ1990 (Jul) to IQ1991 (Mar) (https://www.nber.org/cycles.html). The expansion lasted until another contraction beginning in IQ2001 (Mar). US GDP contracted 1.3 percent from the pre-recession peak of $8983.9 billion of chained 2009 dollars in IIIQ1990 to the trough of $8865.6 billion in IQ1991 (https://apps.bea.gov/iTable/index_nipa.cfm).

clip_image013

Chart IB-5, US, Real Disposable Income, Billions of Chained 2009 Dollars, Quarterly Seasonally Adjusted at Annual Rates 1980-1993

Source: US Bureau of Economic Analysis

https://apps.bea.gov/iTable/index_nipa.cfm

Chart IB-6 provides real disposable income from 2007 to 2020. In IVQ2012, nominal disposable personal income grew at the SAAR of 13.3 percent and real disposable personal income at 10.9 percent (Table 2.1 http://bea.gov/iTable/index_nipa.cfm). The BEA explains as follows: “Personal income in November and December was boosted by accelerated and special dividend payments to persons and by accelerated bonus payments and other irregular pay in private wages and salaries in anticipation of changes in individual income tax rates. Personal income in December was also boosted by lump-sum social security benefit payments” (page 2 at http://www.bea.gov/newsreleases/national/pi/2013/pdf/pi1212.pdf pages 1-2 at http://www.bea.gov/newsreleases/national/pi/2013/pdf/pi0113.pdf). The Bureau of Economic Analysis explains as (http://www.bea.gov/newsreleases/national/pi/2013/pdf/pi0213.pdf 2-3): “The January estimate of employee contributions for government social insurance reflected the expiration of the “payroll tax holiday,” that increased the social security contribution rate for employees and self-employed workers by 2.0 percentage points, or $114.1 billion at an annual rate. For additional information, see FAQ on “How did the expiration of the payroll tax holiday affect personal income for January 2013?” at www.bea.gov. The January estimate of employee contributions for government social insurance also reflected an increase in the monthly premiums paid by participants in the supplementary medical insurance program, in the hospital insurance provisions of the Patient Protection and Affordable Care Act, and in the social security taxable wage base.”

The increase was provided in the “fiscal cliff” law H.R. 8 American Taxpayer Relief Act of 2012 (http://www.gpo.gov/fdsys/pkg/BILLS-112hr8eas/pdf/BILLS-112hr8eas.pdf). There are revisions since 1929 (Table 6 at https://www.bea.gov/newsreleases/national/pi/2017/pdf/pi1117.pdf).

In IQ2013, personal income fell at the SAAR of minus 10.4 percent; real personal income excluding current transfer receipts at minus 11.9 percent; and real disposable personal income at minus 15.1 percent (Table 14 at https://www.bea.gov/system/files/2018-07/pi0618.pdf).The BEA explains as follows (page 3 at http://www.bea.gov/newsreleases/national/pi/2013/pdf/pi0313.pdf):

“The February and January changes in disposable personal income (DPI) mainly reflected the effect of special factors in January, such as the expiration of the “payroll tax holiday” and the acceleration of bonuses and personal dividends to November and to December in anticipation of changes in individual tax rates.”

In IIIQ2014, personal income grew at 6.3 percent, nominal disposable income at 5.9 percent and real disposable personal income at 4.4 percent (Table 14 at https://www.bea.gov/system/files/2019-07/pi0619.pdf). In IVQ2014, personal income grew at 5.3 percent in nominal terms while nominal disposable income grew at 4.9 percent in nominal terms and at 5.4 percent in real terms (Table 14 at https://www.bea.gov/system/files/2019-07/pi0619.pdf). In IQ2015, nominal personal income grew at 4.3 percent while nominal disposable income grew at 2.8 percent and at 4.6 percent in real terms (Table 14 at https://www.bea.gov/system/files/2019-07/pi0619.pdf). In IIQ2015, nominal personal income grew at 5.4 percent while nominal disposable income grew at 5.1 percent and real disposable income grew at 3.0 percent (Table 14 at https://www.bea.gov/system/files/2019-07/pi0619.pdf). In IIIQ2015, nominal personal income grew at 3.8 percent while nominal disposable income grew at 4.1 percent and real disposable income grew at 3.0 percent (Table 14 at https://www.bea.gov/system/files/2019-07/pi0619.pdf). In IVQ2015, nominal personal income grew at 1.2 percent while nominal disposable income grew at 0.9 percent and real disposable income at 1.3 percent (Table 14 at https://www.bea.gov/system/files/2019-07/pi0619.pdf). In IQ2016, personal income grew at 1.6 percent and fell at 2.1 percent excluding transfer receipts while nominal disposable income grew at 2.9 percent and real disposable income grew at 2.7 percent (Table 14 at https://www.bea.gov/system/files/2019-07/pi0619.pdf). In IIQ2016, personal income grew at 2.3 percent and at 2.2 percent excluding transfer receipts while nominal disposable income grew at 2.0 percent and real disposable income fell at 0.4 percent (Table 14 at https://www.bea.gov/system/files/2019-07/pi0619.pdf). In IIIQ2016, personal income grew at 3.7 percent and at 1.3 percent excluding transfer receipts while nominal disposable income grew at 3.5 percent and real disposable income grew at 1.8 percent (Table 14 at https://www.bea.gov/system/files/2019-07/pi0619.pdf). In IVQ2016, nominal personal income grew at 4.2 percent, decreasing at 2.6 percent excluding current transfers while disposable income grew at 4.3 percent and real disposable income increased at 2.4 percent (Table 14 at https://www.bea.gov/system/files/2019-07/pi0619.pdf). In IQ2017, nominal personal income grew at 6.6 percent and 4.7 percent excluding transfer receipts while nominal disposable income grew at 7.1 percent and real disposable income at 4.9 percent (Table 14 at https://www.bea.gov/system/files/2019-07/pi0619.pdf). In IIQ2017, nominal personal income grew at 3.6 percent and 2.4 percent excluding transfer receipts while nominal disposable income grew at 3.6 percent and real disposable income at 2.7 percent (Table 14 at https://www.bea.gov/system/files/2019-07/pi0619.pdf). In IIIQ2017, nominal personal income grew at 4.4 percent and at 2.5 percent excluding transfer receipts while nominal disposable income grew at 4.1 percent and real disposable personal income grew at 2.3 percent (Table 14 at https://www.bea.gov/system/files/2019-07/pi0619.pdf). In IVQ2017, nominal personal income grew at 7.3 percent and at 2.9 percent real excluding transfer receipts while nominal disposable income grew at 6.5 percent and real disposable personal income grew at 3.7 percent (Table 14 at https://www.bea.gov/system/files/2019-07/pi0619.pdf). In IQ2018, nominal personal income grew at 7.4 percent and at 4.6 percent real excluding transfer receipts while nominal disposable income grew at 9.6 percent and real disposable income grew at 6.9 percent (Table 6 at https://www.bea.gov/system/files/2019-09/pi0819.pdf). In IIQ2018, nominal personal income grew at 4.3 percent and at 2.1 percent real excluding transfer receipts while nominal disposable income grew at 4.9 percent and real disposable income grew at 2.7 percent (Table 6 at https://www.bea.gov/system/files/2019-12/pi1119.pdf). In IIIQ2018, nominal personal income grew at 4.7 percent and at 3.4 percent real excluding transfer receipts while nominal disposable income grew at 4.9 percent and real disposable income grew at 3.3 percent (Table 6 at https://www.bea.gov/system/files/2020-03/pi0220_1.pdf). In IVQ2018, nominal personal income grew at 3.5 percent and at 2.3 percent real excluding transfer receipts while nominal disposable income grew at 4.2 percent and real disposable income grew at 2.8 percent (Table 6 at https://www.bea.gov/sites/default/files/2020-06/pi0520_0.pdf). In IQ2019, nominal personal income grew at 6.2 percent and at 4.0 real percent excluding transfer receipts while nominal disposable income grew at 4.9 percent and real disposable income grew at 4.5 percent (Table 6 at https://www.bea.gov/sites/default/files/2020-06/pi0520_0.pdf). In IIQ2019, nominal personal income grew at 4.4 percent and at 1.7 real percent excluding transfer receipts while nominal disposable income grew at 3.9 percent and real disposable income grew at 1.5 percent (Table 6 at https://www.bea.gov/sites/default/files/2020-06/pi0520_0.pdf). In IIIQ2019, nominal personal income grew at 2.6 percent and at 0.7 real percent excluding transfer receipts while nominal disposable income grew at 3.6 percent and real disposable income grew at 2.1 percent (Table 6 at https://www.bea.gov/sites/default/files/2020-06/pi0520_0.pdf). In IVQ2019, nominal personal income grew at 3.7 percent and at 2.4 percent real excluding current transfers while nominal disposable income grew at 3.5 percent and real disposable income grew at 2.1 percent (Table 6 at https://www.bea.gov/sites/default/files/2020-06/pi0520_0.pdf). In IQ2020, nominal personal income grew at 2.1 percent and decreased at 1.0 percent real excluding current transfers while nominal disposable income grew at 2.2 percent and real disposable income grew at 0.9 percent (Table 6 at https://www.bea.gov/sites/default/files/2020-06/pi0520_0.pdf).

clip_image015

Chart IB-6, US, Real Disposable Income, Billions of Chained 2012 Dollars, Quarterly Seasonally Adjusted at Annual Rates, 2007-2020

https://apps.bea.gov/iTable/index_nipa.cfm

Chart IB-7 provides percentage quarterly changes in real disposable income from the preceding period at seasonally adjusted annual rates from 1980 to 1993. Rates of changes were high during the decade with few negative changes. The National Bureau of Economic Research (NBER) dates a contraction of the US from IQ1990 (Jul) to IQ1991 (Mar) (https://www.nber.org/cycles.html). The expansion lasted until another contraction beginning in IQ2001 (Mar). US GDP contracted 1.3 percent from the pre-recession peak of $8983.9 billion of chained 2009 dollars in IIIQ1990 to the trough of $8865.6 billion in IQ1991 (https://apps.bea.gov/iTable/index_nipa.cfm).

clip_image017

Chart IB-7, US, Real Disposable Income Percentage Change from Preceding Period at Quarterly Seasonally Adjusted Annual Rates, 1980-1993

Source: US Bureau of Economic Analysis

https://apps.bea.gov/iTable/index_nipa.cfm

Chart IB-8 provides percentage quarterly changes in real disposable income from the preceding period at seasonally adjusted annual rates from 2007 to 2020. There has been a period of positive rates followed by decline of rates and then negative and low rates in 2011. Recovery in 2012 has not reproduced the dynamism of the brief early phase of expansion. In IVQ2012, nominal disposable personal income grew at the SAAR of 13.3 percent and real disposable personal income at 10.9 percent (Table 2.1 http://bea.gov/iTable/index_nipa.cfm). The BEA explains as follows: “Personal income in November and December was boosted by accelerated and special dividend payments to persons and by accelerated bonus payments and other irregular pay in private wages and salaries in anticipation of changes in individual income tax rates. Personal income in December was also boosted by lump-sum social security benefit payments” (page 2 at http://www.bea.gov/newsreleases/national/pi/2013/pdf/pi1212.pdf pages 1-2 at http://www.bea.gov/newsreleases/national/pi/2013/pdf/pi0113.pdf). The Bureau of Economic Analysis explains as (http://www.bea.gov/newsreleases/national/pi/2013/pdf/pi0213.pdf 2-3): “The January estimate of employee contributions for government social insurance reflected the expiration of the “payroll tax holiday,” that increased the social security contribution rate for employees and self-employed workers by 2.0 percentage points, or $114.1 billion at an annual rate. For additional information, see FAQ on “How did the expiration of the payroll tax holiday affect personal income for January 2013?” at www.bea.gov. The January estimate of employee contributions for government social insurance also reflected an increase in the monthly premiums paid by participants in the supplementary medical insurance program, in the hospital insurance provisions of the Patient Protection and Affordable Care Act, and in the social security taxable wage base.”

The increase was provided in the “fiscal cliff” law H.R. 8 American Taxpayer Relief Act of 2012 (http://www.gpo.gov/fdsys/pkg/BILLS-112hr8eas/pdf/BILLS-112hr8eas.pdf). There are revisions since 1929 (Table 6 at https://www.bea.gov/newsreleases/national/pi/2017/pdf/pi1117.pdf).

In IQ2013, personal income fell at the SAAR of minus 10.4 percent; real personal income excluding current transfer receipts at minus 11.9 percent; and real disposable personal income at minus 15.1 percent (Table 14 at https://www.bea.gov/system/files/2018-07/pi0618.pdf).The BEA explains as follows (page 3 at http://www.bea.gov/newsreleases/national/pi/2013/pdf/pi0313.pdf):

“The February and January changes in disposable personal income (DPI) mainly reflected the effect of special factors in January, such as the expiration of the “payroll tax holiday” and the acceleration of bonuses and personal dividends to November and to December in anticipation of changes in individual tax rates.”

In IIIQ2014, personal income grew at 6.3 percent, nominal disposable income at 5.9 percent and real disposable personal income at 4.4 percent (Table 14 at https://www.bea.gov/system/files/2019-07/pi0619.pdf). In IVQ2014, personal income grew at 5.3 percent in nominal terms while nominal disposable income grew at 4.9 percent in nominal terms and at 5.4 percent in real terms (Table 14 at https://www.bea.gov/system/files/2019-07/pi0619.pdf). In IQ2015, nominal personal income grew at 4.3 percent while nominal disposable income grew at 2.8 percent and at 4.6 percent in real terms (Table 14 at https://www.bea.gov/system/files/2019-07/pi0619.pdf). In IIQ2015, nominal personal income grew at 5.4 percent while nominal disposable income grew at 5.1 percent and real disposable income grew at 3.0 percent (Table 14 at https://www.bea.gov/system/files/2019-07/pi0619.pdf). In IIIQ2015, nominal personal income grew at 3.8 percent while nominal disposable income grew at 4.1 percent and real disposable income grew at 3.0 percent (Table 14 at https://www.bea.gov/system/files/2019-07/pi0619.pdf). In IVQ2015, nominal personal income grew at 1.2 percent while nominal disposable income grew at 0.9 percent and real disposable income at 1.3 percent (Table 14 at https://www.bea.gov/system/files/2019-07/pi0619.pdf). In IQ2016, personal income grew at 1.6 percent and fell at 2.1 percent excluding transfer receipts while nominal disposable income grew at 2.9 percent and real disposable income grew at 2.7 percent (Table 14 at https://www.bea.gov/system/files/2019-07/pi0619.pdf). In IIQ2016, personal income grew at 2.3 percent and at 2.2 percent excluding transfer receipts while nominal disposable income grew at 2.0 percent and real disposable income fell at 0.4 percent (Table 14 at https://www.bea.gov/system/files/2019-07/pi0619.pdf). In IIIQ2016, personal income grew at 3.7 percent and at 1.3 percent excluding transfer receipts while nominal disposable income grew at 3.5 percent and real disposable income grew at 1.8 percent (Table 14 at https://www.bea.gov/system/files/2019-07/pi0619.pdf). In IVQ2016, nominal personal income grew at 4.2 percent, decreasing at 2.6 percent excluding current transfers while disposable income grew at 4.3 percent and real disposable income increased at 2.4 percent (Table 14 at https://www.bea.gov/system/files/2019-07/pi0619.pdf). In IQ2017, nominal personal income grew at 6.6 percent and 4.7 percent excluding transfer receipts while nominal disposable income grew at 7.1 percent and real disposable income at 4.9 percent (Table 14 at https://www.bea.gov/system/files/2019-07/pi0619.pdf). In IIQ2017, nominal personal income grew at 3.6 percent and 2.4 percent excluding transfer receipts while nominal disposable income grew at 3.6 percent and real disposable income at 2.7 percent (Table 14 at https://www.bea.gov/system/files/2019-07/pi0619.pdf). In IIIQ2017, nominal personal income grew at 4.4 percent and at 2.5 percent excluding transfer receipts while nominal disposable income grew at 4.1 percent and real disposable personal income grew at 2.3 percent (Table 14 at https://www.bea.gov/system/files/2019-07/pi0619.pdf). In IVQ2017, nominal personal income grew at 7.3 percent and at 2.9 percent real excluding transfer receipts while nominal disposable income grew at 6.5 percent and real disposable personal income grew at 3.7 percent (Table 14 at https://www.bea.gov/system/files/2019-07/pi0619.pdf). In IQ2018, nominal personal income grew at 7.4 percent and at 4.6 percent real excluding transfer receipts while nominal disposable income grew at 9.6 percent and real disposable income grew at 6.9 percent (Table 6 at https://www.bea.gov/system/files/2019-09/pi0819.pdf). In IIQ2018, nominal personal income grew at 4.3 percent and at 2.1 percent real excluding transfer receipts while nominal disposable income grew at 4.9 percent and real disposable income grew at 2.7 percent (Table 6 at https://www.bea.gov/system/files/2019-12/pi1119.pdf). In IIIQ2018, nominal personal income grew at 4.7 percent and at 3.4 percent real excluding transfer receipts while nominal disposable income grew at 4.9 percent and real disposable income grew at 3.3 percent (Table 6 at https://www.bea.gov/system/files/2020-03/pi0220_1.pdf). In IVQ2018, nominal personal income grew at 3.5 percent and at 2.3 percent real excluding transfer receipts while nominal disposable income grew at 4.2 percent and real disposable income grew at 2.8 percent (Table 6 at https://www.bea.gov/sites/default/files/2020-06/pi0520_0.pdf). In IQ2019, nominal personal income grew at 6.2 percent and at 4.0 real percent excluding transfer receipts while nominal disposable income grew at 4.9 percent and real disposable income grew at 4.5 percent (Table 6 at https://www.bea.gov/sites/default/files/2020-06/pi0520_0.pdf). In IIQ2019, nominal personal income grew at 4.4 percent and at 1.7 real percent excluding transfer receipts while nominal disposable income grew at 3.9 percent and real disposable income grew at 1.5 percent (Table 6 at https://www.bea.gov/sites/default/files/2020-06/pi0520_0.pdf). In IIIQ2019, nominal personal income grew at 2.6 percent and at 0.7 real percent excluding transfer receipts while nominal disposable income grew at 3.6 percent and real disposable income grew at 2.1 percent (Table 6 at https://www.bea.gov/sites/default/files/2020-06/pi0520_0.pdf). In IVQ2019, nominal personal income grew at 3.7 percent and at 2.4 percent real excluding current transfers while nominal disposable income grew at 3.5 percent and real disposable income grew at 2.1 percent (Table 6 at https://www.bea.gov/sites/default/files/2020-06/pi0520_0.pdf). In IQ2020, nominal personal income grew at 2.1 percent and decreased at 1.0 percent real excluding current transfers while nominal disposable income grew at 2.2 percent and real disposable income grew at 0.9 percent (Table 6 at https://www.bea.gov/sites/default/files/2020-06/pi0520_0.pdf).

clip_image019

Chart, IB-8, US, Real Disposable Income, Percentage Change from Preceding Period at Seasonally Adjusted Annual Rates, 2007-2020

Source: US Bureau of Economic Analysis

https://apps.bea.gov/iTable/index_nipa.cfm

The Bureau of Economic Analysis (BEA) estimates US personal income in May 2020 at the seasonally adjusted annual rate of $19,839.3 billion, as shown in Table IB-3 above (see Table 1 at https://www.bea.gov/sites/default/files/2020-06/pi0520_0.pdf). The major portion of personal income is compensation of employees of $10,753.7 billion, or 54.2 percent of the total. Wages and salaries are $8,733.3 billion, of which $7,321.8 billion by private industries and supplements to wages and salaries of $2,020.4 billion (contributions to government social insurance are $622.2 billion). “Other government social benefits to persons” are $1,179.3 billion in May 2020 compared with $3,145.3 billion in Apr 2020 (https://www.bea.gov/sites/default/files/2020-06/pi0520_0.pdf). In Oct 1993 (at the comparable month after the 43rd quarter of cyclical expansion), US personal income was $5,674.3 billion at SAAR (https://apps.bea.gov/iTable/index_nipa.cfm). Compensation of employees was $3,819.4 billion, or 67.3 percent of the total. Wages and salaries were $3,076.0 billion of which $2,482.8 billion by private industries. Supplements to wages and salaries were $743.4 billion with employer contributions to pension and insurance funds of $503.7 billion and $239.6 billion to government social insurance. Chart IB-9 provides US wages and salaries by private industries in the 1980s and 1990-1993. Growth was robust after the interruption of the recessions. The National Bureau of Economic Research (NBER) dates a contraction of the US from IQ1990 (Jul) to IQ1991 (Mar) (https://www.nber.org/cycles.html). The expansion lasted until another contraction beginning in IQ2001 (Mar). US GDP contracted 1.3 percent from the pre-recession peak of $8983.9 billion of chained 2009 dollars in IIIQ1990 to the trough of $8865.6 billion in IQ1991 (https://apps.bea.gov/iTable/index_nipa.cfm).

clip_image021

Chart IB-9, US, Wages and Salaries, Private Industries, Quarterly, Seasonally Adjusted at Annual Rates Billions of Dollars, 1980-1993

Source: US Bureau of Economic Analysis

https://apps.bea.gov/iTable/index_nipa.cfm

The Bureau of Economic Analysis (BEA) estimates US personal income in May 2020 at the seasonally adjusted annual rate of $19,839.3 billion, as shown in Table IB-3 above (see Table 1 at https://www.bea.gov/sites/default/files/2020-06/pi0520_0.pdf). The major portion of personal income is compensation of employees of $10,753.7 billion, or 54.2 percent of the total. Wages and salaries are $8,733.3 billion, of which $7,321.8 billion by private industries and supplements to wages and salaries of $2,020.4 billion (contributions to government social insurance are $622.2 billion). “Other government social benefits to persons” are $1,179.3 billion in May 2020 compared with $3,145.3 billion in Apr 2020 (https://www.bea.gov/sites/default/files/2020-06/pi0520_0.pdf). Chart IB-10 provides US wages and salaries by private industries since 2007. Growth was mediocre in the cyclically weak expansion phase after IIIQ2009.

clip_image023

Chart IB-10, US, Wage and Salary Disbursement, Private Industries, Quarterly, Seasonally Adjusted at Annual Rates, Billions of Dollars 2007-2020

Source: US Bureau of Economic Analysis

https://apps.bea.gov/iTable/index_nipa.cfm

Chart IB-11 provides finer detail with monthly wages and salaries of private industries from 2007 to 2020. Anticipations of income in late 2012 to avoid tax increases in 2013 cloud comparisons. There is sharp contraction in Mar-Apr 2020 with recovery in May 2020 in the global recession, with output in the US reaching a high in Feb 2020 (https://www.nber.org/cycles.html), in the lockdown of economic activity in the COVID-19 event.

clip_image025

Chart IB-11, US, Wages and Salaries, Private Industries, Monthly, Seasonally Adjusted at Annual Rates, Billions of Dollars 2007-2020

Source: US Bureau of Economic Analysis

https://apps.bea.gov/iTable/index_nipa.cfm

Chart IB-12 provides monthly real disposable personal income per capita from 1980 to 1993. This is the ultimate measure of wellbeing in receiving income by obtaining the value per inhabitant. The measure cannot adjust for the distribution of income. Real disposable income per capita grew rapidly during the expansion after 1983 and continued growing during the rest of the decade. The National Bureau of Economic Research (NBER) dates a contraction of the US from IQ1990 (Jul) to IQ1991 (Mar) (https://www.nber.org/cycles.html). The expansion lasted until another contraction beginning in IQ2001 (Mar). US GDP contracted 1.3 percent from the pre-recession peak of $8983.9 billion of chained 2009 dollars in IIIQ1990 to the trough of $8865.6 billion in IQ1991 (https://apps.bea.gov/iTable/index_nipa.cfm).

clip_image027

Chart IB-12, US, Real Disposable Per Capita Income, Monthly, Seasonally Adjusted at Annual Rates, Chained 2009 Dollars 1980-1993

Source: US Bureau of Economic Analysis

https://apps.bea.gov/iTable/index_nipa.cfm

Table IB-5 provides the comparison between the cycle of the 1980s and the current cycle. Real per capita disposable income (RDPI-PC) increased 29.3 percent from Dec 1979 to Aug 1993. In the comparable period in the current cycle from Dec 2007 to Feb 2020, real per capita disposable income increased 21.4 percent. The National Bureau of Economic Research (NBER) dates a contraction of the US from IQ1990 (Jul) to IQ1991 (Mar) (https://www.nber.org/cycles.html). Real per capita disposable income (RDPI-PC) increased 28.2 percent from Dec 1979 to Nov 1993. The National Bureau of Economic Research (NBER) dates a contraction of the US from IQ1990 (Jul) to IQ1991 (Mar) (https://www.nber.org/cycles.html). The expansion lasted until another contraction beginning in IQ2001 (Mar). US GDP contracted 1.3 percent from the pre-recession peak of $8983.9 billion of chained 2009 dollars in IIIQ1990 to the trough of $8865.6 billion in IQ1991 (https://apps.bea.gov/iTable/index_nipa.cfm). In the comparable period in the current cycle from Dec 2007 to May 2020, real per capita disposable income increased 28.6 percent. The decrease of real per capita income in Mar 2020 of 0.2 percent, the increase of 13.4 percent in Apr 2020 and the increase of 7.7 percent in May 2020 reflect the global recession, with output in the US reaching a high in Feb 2020 (https://www.nber.org/cycles.html), in the lockdown of economic activity in the COVID-19 event. The BEA explains (https://www.bea.gov/sites/default/files/2020-06/pi0520_0.pdf): “The May estimate for personal income and outlays was impacted by the response to the spread

of COVID-19. Federal economic recovery payments continued but were at a lower level than in

April, and government “stay-at-home” orders were partially lifted in May. The full economic

effects of the COVID-19 pandemic cannot be quantified in the personal income and outlays

estimate for May because the impacts are generally embedded in source data and cannot be

separately identified. For more information, see the “highlights” file and the Effects of Selected

Federal Pandemic Response Programs on Personal Income table.”

Table IB-5, Percentage Changes of Real Disposable Personal Income Per Capita

Month

RDPI-PC ∆% 12/79

RDPI-PC ∆% YOY

Month

RDPI-PC ∆% 12/07

RDPI-PC ∆% YOY

11/1982

2.7

0.6

6/2009

-0.6

-1.8

12/1982

3.1

1.2

9/2009

-1.4

-0.5

12/1983

8.2

5.0

6/2010

0.5

1.2

12/1987

20.6

2.8

6/2014

5.7

3.1

1/1988

20.8

2.6

7/2014

6.0

3.5

2/1988

21.4

2.7

8/2014

6.4

3.8

3/1988

21.9

3.0

9/2014

6.7

3.7

4/1988

22.2

7.4

10/2014

7.1

4.4

5/1988

22.3

3.3

11/2014

7.5

4.5

6/1988

22.6

3.8

12/2014

8.1

4.9

7/1988

23.0

4.0

1/2015

8.6

4.8

8/1988

23.3

3.8

2/2015

8.8

4.5

9/1988

23.4

4.0

3/2015

8.4

3.6

10/1988

23.9

3.9

4/2015

9.0

3.8

11/1988

23.9

3.5

5/2015

9.3

3.8

12/1988

24.4

3.1

6/2015

9.5

3.5

1/1989

24.9

3.4

7/2015

9.7

3.5

2/1989

25.2

3.1

8/2015

9.8

3.2

3/1989

25.7

3.2

9/2015

10.0

3.1

4/1989

25.0

2.3

10/2015

10.0

2.8

5/1989

24.3

1.6

11/2015

9.8

2.1

6/1989

24.5

1.6

12/2015

10.1

1.8

7/1989

24.9

1.5

1/2016

10.5

1.8

8/1989

25.1

1.5

2/2016

10.5

1.6

9/1989

25.3

1.6

3/2016

10.6

2.0

10/1989

25.8

1.5

4/2016

10.3

1.3

11/1989

25.8

1.6

5/2016

10.2

0.8

12/1989

25.7

1.1

6/2016

10.2

0.6

1/1990

26.4

1.2

7/2016

10.4

0.7

2/1990

26.5

1.1

8/2016

10.4

0.6

3/1990

26.5

0.6

9/2016

10.7

0.6

4/1990

27.1

1.7

10/2016

10.8

0.8

5/1990

26.8

2.1

11/2016

11.0

1.1

6/1990

26.9

1.9

12/2016

11.1

0.9

7/1990

27.2

1.9

1/2017

11.7

1.1

8/1990

26.2

0.9

2/2017

12.1

1.4

9/1990

26.0

0.6

3/2017

12.6

1.9

10/1990

24.8

-0.8

4/2017

12.5

2.0

11/1990

24.7

-0.9

5/2017

12.9

2.5

12/1990

25.3

-0.3

06/2017

12.8

2.4

1/1991

24.8

-1.2

07/2017

13.0

2.4

2/1991

24.9

-1.3

08/2017

13.2

2.5

3/1991

24.9

-1.2

09/2017

13.4

2.5

4/1991

25.3

-1.4

10/2017

13.7

2.6

5/1991

25.2

-1.3

11/2017

14.0

2.7

6/1991

25.7

-0.9

12/2017

14.5

3.0

7/1991

25.3

-1.5

1/2018

15.6

3.4

8/1991

25.4

-0.6

2/2018

15.8

3.3

9/1991

25.6

-0.3

3/2018

16.2

3.2

10/1991

25.7

0.7

4/2018

16.3

3.4

11/1991

25.7

0.8

5/2018

16.5

3.1

12/1991

26.8

1.2

6/2018

16.8

3.5

1/1992

27.9

2.5

7/2018

17.1

3.5

2/1992

28.4

2.8

8/2018

17.4

3.8

3/1992

28.4

2.8

9/2018

17.3

3.5

4/1992

28.6

2.7

10/2018

17.5

3.3

5/1992

29.1

3.1

11/2018

17.6

3.2

6/1992

29.5

3.0

12/2018

18.7

3.7

7/1992

29.2

3.1

1/2019

18.7

2.7

8/1992

29.5

3.3

2/2019

19.2

2.9

9/1992

28.8

2.5

3/2019

19.4

2.8

10/1992

27.8

1.7

04/2019

19.3

2.6

11/1992

27.9

1.7

05/2019

19.4

2.5

12/1992

32.3

4.4

06/2019

19.6

2.4

1/1993

29.3

1.1

07/2019

19.5

2.1

2/1993

29.8

1.1

08/2019

20.0

2.2

3/1993

29.2

0.7

09/2019

20.3

2.5

4/1993

29.8

0.9

10/2019

20.1

2.2

5/1993

29.5

0.3

11/2019

20.6

2.5

6/1993

29.1

-0.3

12/2019

20.4

1.5

7/1993

29.2

0.0

1/2020

20.9

1.9

8/1993

29.3

-0.2

2/2020

21.4

1.9

9/1993

28.8

0.0

3/2020

19.2

-0.2

10/1993

28.0

0.2

4/2020

35.4

13.4

11/1993

28.2

0.3

5/2020

28.6

7.7

RDPI: Real Disposable Personal Income; RDPI-PC, Real Disposable Personal Income Per Capita

Source: US Bureau of Economic Analysis https://apps.bea.gov/iTable/index_nipa.cfm

National Bureau of Economic Research

https://www.nber.org/cycles.html

Chart IB-13 provides monthly real disposable personal income per capita from 2007 to 2020. There was initial recovery from the drop during the global recession followed by relative cyclical weakness. The final data points is contraction in Mar 2020 in the lockdown of economic activity in the global recession, with output in the US reaching a high in Feb 2020 (https://www.nber.org/cycles.html), in the lockdown of economic activity in the COVID-19 event, followed by sharp increase in Apr 2020. The BEA explains (https://www.bea.gov/sites/default/files/2020-05/pi0420_0.pdf): The increase in personal income in April primarily reflected an increase in government social benefits to persons as payments were made to individuals from federal economic recovery programs in response to the COVID-19 pandemic (table 3). For more information, see “How are the economic impact payments for individuals authorized by the CARES Act of 2020 recorded in the NIPAs?” “Other government social benefits to persons” are $3,122.1 billion in Apr 2020 compared with $528.3 billion in Mar 2020 (https://www.bea.gov/sites/default/files/2020-05/pi0420_0.pdf). There is contraction in the final data point in May 2020.

clip_image029

Chart IB-13, US, Real Disposable Per Capita Income, Monthly, Seasonally Adjusted at Annual Rates, Chained 2012 Dollars 2007-2020

Source: US Bureau of Economic Analysis

https://apps.bea.gov/iTable/index_nipa.cfm

Table IB-6 provides data for analysis of the current cycle. Real disposable income (RDPI) increased 32.0 percent from Dec 2007 to Feb 2020 (column RDPI ∆% 12/07). In the same period, real disposable income per capita increased 21.4 percent (column RDPI-PC ∆% 12/07). The annual equivalent rate of increase of real disposable income per capita is 1.6 percent, only a fraction of 2.0 percent on average from 1929 to 2019, and 2.3 percent for real disposable income, much lower than 3.2 percent on average from 1929 to 2019. Real disposable income (RDPI) increased 47.3 percent from Dec 2007 to Apr 2020 (column RDPI ∆% 12/07). In the same period, real disposable income per capita increased 35.4 percent (column RDPI-PC ∆% 12/07). The contraction of real disposable income of 1.8 percent in Mar 2020 and the contraction of 1.9 percent of real disposable income per capita occur in the global recession, with output in the US reaching a high in Feb 2020 (https://www.nber.org/cycles.html), in the lockdown of economic activity in the COVID-19 event. The BEA explains (https://www.bea.gov/sites/default/files/2020-05/pi0420_0.pdf): The increase in personal income in April primarily reflected an increase in government social benefits to persons as payments were made to individuals from federal economic recovery programs in response to the COVID-19 pandemic (table 3). For more information, see “How are the economic impact payments for individuals authorized by the CARES Act of 2020 recorded in the NIPAs?” “Other government social benefits to persons” are $3,122.1 billion in Apr 2020 compared with $528.3 billion in Mar 2020 (https://www.bea.gov/sites/default/files/2020-05/pi0420_0.pdf). RDPI decreased 5.0 percent in May 2020 and RDPI-PC decreased 5.0 percent. The BEA explains (https://www.bea.gov/sites/default/files/2020-06/pi0520_0.pdf): “The May estimate for personal income and outlays was impacted by the response to the spread

of COVID-19. Federal economic recovery payments continued but were at a lower level than in

April, and government “stay-at-home” orders were partially lifted in May. The full economic

effects of the COVID-19 pandemic cannot be quantified in the personal income and outlays

estimate for May because the impacts are generally embedded in source data and cannot be

separately identified. For more information, see the “highlights” file and the Effects of Selected

Federal Pandemic Response Programs on Personal Income table.”

Table IB-6, Percentage Changes of Real Disposable Personal Income and Real Disposable Personal Income Per Capita

Month

RDPI
∆% 12/07

RDPI ∆% Month

RDPI ∆% YOY

RDPI-PC ∆% 12/07

RDPI-PC ∆% Month

RDPI-PC ∆% YOY

6/09

0.7

-1.7

-0.9

-0.6

-1.7

-1.8

9/09

0.2

0.2

0.4

-1.4

0.1

-0.5

6/10

2.7

0.2

2.0

0.5

0.1

1.2

12/10

4.2

0.7

3.6

1.6

0.6

2.8

6/11

4.8

0.5

2.0

1.8

0.4

1.2

12/11

5.9

0.9

1.6

2.5

0.9

0.9

6/12

8.3

0.1

3.4

4.5

0.0

2.6

10/12

8.4

0.8

3.3

4.4

0.7

2.6

11/12

10.0

1.4

4.8

5.8

1.4

4.1

12/12

12.8

2.5

6.5

8.4

2.5

5.8

6/13

7.0

0.1

-1.1

2.6

0.0

-1.8

12/13

8.0

0.3

-4.2

3.1

0.3

-4.9

1/14

8.5

0.5

2.1

3.5

0.4

1.4

2/14

9.2

0.6

3.2

4.1

0.6

2.5

3/14

9.8

0.5

3.6

4.6

0.5

2.9

4/14

10.2

0.4

3.6

5.0

0.3

2.9

5/14

10.6

0.4

3.4

5.3

0.3

2.7

6/14

11.1

0.5

3.8

5.7

0.4

3.1

7/14

11.5

0.3

4.2

6.0

0.2

3.5

8/14

12.0

0.5

4.5

6.4

0.4

3.8

9/14

12.3

0.3

4.4

6.7

0.2

3.7

10/14

12.8

0.4

5.1

7.1

0.4

4.4

11/14

13.4

0.5

5.3

7.5

0.4

4.5

12/14

14.1

0.6

5.6

8.1

0.6

4.9

1/15

14.6

0.5

5.6

8.6

0.4

4.8

2/15

14.9

0.3

5.3

8.8

0.2

4.5

3/15

14.6

-0.3

4.4

8.4

-0.3

3.6

4/15

15.2

0.5

4.5

9.0

0.5

3.8

5/15

15.6

0.4

4.5

9.3

0.3

3.8

6/15

15.9

0.2

4.3

9.5

0.2

3.5

7/15

16.2

0.2

4.2

9.7

0.2

3.5

8/15

16.4

0.2

3.9

9.8

0.1

3.2

9/15

16.7

0.2

3.9

10.0

0.2

3.1

10/15

16.8

0.1

3.5

10.0

0.0

2.8

11/15

16.6

-0.1

2.8

9.8

-0.2

2.1

12/15

17.0

0.3

2.6

10.1

0.3

1.8

1/16

17.5

0.4

2.5

10.5

0.3

1.8

2/16

17.6

0.1

2.3

10.5

0.0

1.6

3/16

17.7

0.1

2.7

10.6

0.0

2.0

4/16

17.5

-0.2

2.0

10.3

-0.2

1.3

5/16

17.4

-0.1

1.5

10.2

-0.1

0.8

6/16

17.4

0.0

1.3

10.2

0.0

0.6

7/16

17.8

0.3

1.4

10.4

0.2

0.7

8/16

17.9

0.1

1.3

10.4

0.0

0.6

9/16

18.2

0.3

1.3

10.7

0.2

0.6

10/16

18.5

0.2

1.5

10.8

0.1

0.8

11/16

18.7

0.2

1.8

11.0

0.1

1.1

12/16

18.9

0.1

1.6

11.1

0.1

0.9

1/17

19.6

0.6

1.8

11.7

0.6

1.1

2/17

20.0

0.4

2.1

12.1

0.3

1.4

3/17

20.6

0.5

2.5

12.6

0.5

1.9

4/17

20.6

-0.1

2.6

12.5

-0.1

2.0

5/17

21.1

0.4

3.2

12.9

0.4

2.5

6/17

21.0

-0.1

3.0

12.8

-0.1

2.4

7/17

21.3

0.3

3.0

13.0

0.2

2.4

8/17

21.6

0.2

3.1

13.2

0.1

2.5

9/17

21.9

0.3

3.1

13.4

0.2

2.5

10/17

22.3

0.3

3.2

13.7

0.3

2.6

11/17

22.6

0.3

3.3

14.0

0.3

2.7

12/17

23.2

0.4

3.6

14.5

0.4

3.0

1/18

24.4

1.0

4.0

15.6

0.9

3.4

2/18

24.7

0.3

3.9

15.8

0.2

3.3

3/18

25.2

0.4

3.8

16.2

0.3

3.2

4/18

25.3

0.1

3.9

16.3

0.1

3.4

5/18

25.5

0.2

3.7

16.5

0.1

3.1

6/18

25.9

0.3

4.1

16.8

0.3

3.5

7/18

26.3

0.3

4.1

17.1

0.3

3.5

8/18

26.8

0.4

4.3

17.4

0.3

3.8

9/18

26.7

0.0

4.0

17.3

-0.1

3.5

10/18

27.0

0.2

3.8

17.5

0.1

3.3

11/18

27.1

0.1

3.7

17.6

0.1

3.2

12/18

28.4

0.9

4.2

18.7

0.9

3.7

1/19

28.4

0.1

3.2

18.7

0.0

2.7

2/19

29.0

0.4

3.4

19.2

0.4

2.9

3/19

29.3

0.2

3.3

19.4

0.2

2.8

04/19

29.2

0.0

3.1

19.3

-0.1

2.6

05/19

29.3

0.1

3.0

19.4

0.0

2.5

06/19

29.6

0.2

2.9

19.6

0.2

2.4

07/19

29.5

-0.1

2.5

19.5

-0.1

2.1

08/19

30.1

0.5

2.6

20.0

0.4

2.2

09/19

30.5

0.3

3.0

20.3

0.2

2.5

10/19

30.4

-0.1

2.7

20.1

-0.1

2.2

11/19

31.0

0.4

3.0

20.6

0.4

2.5

12/19

30.9

-0.1

2.0

20.4

-0.1

1.5

01/20

31.5

0.5

2.4

20.9

0.4

1.9

02/20

32.0

0.4

2.4

21.4

0.4

1.9

03/20

29.6

-1.8

0.3

19.2

-1.9

-0.2

04/20

47.3

13.6

14.0

35.4

13.6

13.4

05/20

40.0

-5.0

8.2

28.6

-5.0

7.7

RDPI: Real Disposable Personal Income; RDPI-PC, Real Disposable Personal Income Per Capita

Source: US Bureau of Economic Analysis  https://apps.bea.gov/iTable/index_nipa.cfm

National Bureau of Economic Research

https://www.nber.org/cycles.html

IA2 Financial Repression. McKinnon (1973) and Shaw (1974) argue that legal restrictions on financial institutions can be detrimental to economic development. “Financial repression” is the term used in the economic literature for these restrictions (see Pelaez and Pelaez, Globalization and the State, Vol. II (2008b), 81-6; for historical analysis see the landmark exhaustive research by Summerhill (2015) and earlier research by Pelaez (1975)). Theory and evidence support the role of financial institutions in efficiency and growth (Pelaez and Pelaez, Financial Regulation after the Global Recession (2009a), 22-6, Pelaez and Pelaez, Regulation of Banks and Finance (2009b), 37-44). Excessive official regulation frustrates financial development required for growth (Haber 2011). Emphasis on disclosure can reduce bank fragility and corruption, empowering investors to enforce sound governance (Barth, Caprio and Levine 2006). Banking was important in facilitating economic growth in historical periods (Cameron 1961, 1967, 1972; Cameron et al. 1992). Banking is also important currently because small- and medium-size business may have no other form of financing than banks in contrast with many options for larger and more mature companies that have access to capital markets. Calomiris and Haber (2014) find that broad voting rights and institutions restricting coalitions of bankers and populists ensure stable banking systems and access to credit. Summerhill (2015) contributes momentous solid facts and analysis with an ideal method combining economic theory, econometrics, international comparisons, data reconstruction and exhaustive archival research. Summerhill (2015) finds that Brazil committed to service of sovereign foreign and internal debt. Contrary to conventional wisdom, Brazil generated primary fiscal surpluses during most of the Empire until 1889 (Summerhill 2015, 37-8, Figure 2.1). Econometric tests by Summerhill (2015, 19-44) show that Brazil’s sovereign debt was sustainable. Sovereign credibility in the North-Weingast (1989) sense spread to financial development that provided the capital for modernization in England and parts of Europe (see Cameron 1961, 1967). Summerhill (2015, 3,194-6, Figure 7.1) finds that “Brazil’s annual cost of capital in London fell from a peak of 13.9 percent in 1829 to only 5.12 percent in 1889. Average rates on secured loans in the private sector in Rio, however, remained well above 12 percent through 1850.” Financial development would have financed diversification of economic activities, increasing productivity and wages and ensuring economic growth. Brazil restricted creation of limited liability enterprises (Summerhill 2015, 151-82) that prevented raising capital with issue of stocks and corporate bonds. Cameron (1961) analyzed how the industrial revolution in England spread to France and then to the rest of Europe. The Société Générale de Crédit Mobilier of Émile and Isaac Péreire provided the “mobilization of credit” for the new economic activities (Cameron 1961). Summerhill (2015, 151-9) provides facts and analysis demonstrating that regulation prevented the creation of a similar vehicle for financing modernization by Irineu Evangelista de Souza, the legendary Visconde de Mauá. Regulation also prevented the use of negotiable bearing notes of the Caisse Générale of Jacques Lafitte (Cameron 1961, 118-9). The government also restricted establishment and independent operation of banks (Summerhill 2015, 183-214). Summerhill (2015, 198-9) measures concentration in banking that provided economic rents or a social loss. The facts and analysis of Summerhill (2015) provide convincing evidence in support of the economic theory of regulation, which postulates that regulated entities capture the process of regulation to promote their self-interest. There appears to be a case that excessively centralized government can result in regulation favoring private instead of public interests with adverse effects on economic activity. The contribution of Summerhill (2015) explains why Brazil did not benefit from trade as an engine of growth—as did regions of recent settlement in the vision of nineteenth-century trade and development of Ragnar Nurkse (1959)—partly because of restrictions on financing and incorporation. Interest rate ceilings on deposits and loans have been commonly used. Professor Rondo E. Cameron, in his memorable A Concise Economic History of the World (Cameron 1989, 307-8), finds that “from a broad spectrum of possible forms of interaction between the financial sector and other sectors of the economy that requires its services, one can isolate three type-cases: (1) that in which the financial sector plays a positive, growth-inducing role; (2) that in which the financial sector is essentially neutral or merely permissive; and (3) that in which inadequate finance restricts or hinders industrial and commercial development.” Summerhill (1985) proves exhaustively that Brazil failed to modernize earlier because of the restrictions of an inadequate institutional financial arrangement plagued by regulatory capture for self-interest. The Banking Act of 1933 imposed prohibition of payment of interest on demand deposits and ceilings on interest rates on time deposits. These measures were justified by arguments that the banking panic of the 1930s was caused by competitive rates on bank deposits that led banks to engage in high-risk loans (Friedman, 1970, 18; see Pelaez and Pelaez, Regulation of Banks and Finance (2009b), 74-5). The objective of policy was to prevent unsound loans in banks. Savings and loan institutions complained of unfair competition from commercial banks that led to continuing controls with the objective of directing savings toward residential construction. Friedman (1970, 15) argues that controls were passive during periods when rates implied on demand deposit were zero or lower and when Regulation Q ceilings on time deposits were above market rates on time deposits. The Great Inflation or stagflation of the 1960s and 1970s changed the relevance of Regulation Q.

Most regulatory actions trigger compensatory measures by the private sector that result in outcomes that are different from those intended by regulation (Kydland and Prescott 1977). Banks offered services to their customers and loans at rates lower than market rates to compensate for the prohibition to pay interest on demand deposits (Friedman 1970, 24). The prohibition of interest on demand deposits was eventually lifted in recent times. In the second half of the 1960s, already in the beginning of the Great Inflation (DeLong 1997), market rates rose above the ceilings of Regulation Q because of higher inflation. Nobody desires savings allocated to time or savings deposits that pay less than expected inflation. This is a fact currently with near zero nominal interest rates, 0 to ¼ percent, and consumer price inflation of 0.3 percent in the 12 months ending in Apr 2020 (https://www.bls.gov/cpi/) but rising during waves of carry trades from zero interest rates to commodity futures exposures (https://cmpassocregulationblog.blogspot.com/2020/06/mediocre-cyclical-united-states.html and earlier https://cmpassocregulationblog.blogspot.com/2020/06/recovery-in-jun-2020-of-manufacturing.html). Funding problems motivated compensatory measures by banks. Money-center banks developed the large certificate of deposit (CD) to accommodate increasing volumes of loan demand by customers. As Friedman (1970, 25) finds:

“Large negotiable CD’s were particularly hard hit by the interest rate ceiling because they are deposits of financially sophisticated individuals and institutions who have many alternatives. As already noted, they declined from a peak of $24 billion in mid-December, 1968, to less than $12 billion in early October, 1969.”

Banks created different liabilities to compensate for the decline in CDs. As Friedman (1970, 25; 1969) explains:

“The most important single replacement was almost surely ‘liabilities of US banks to foreign branches.’ Prevented from paying a market interest rate on liabilities of home offices in the United States (except to foreign official institutions that are exempt from Regulation Q), the major US banks discovered that they could do so by using the Euro-dollar market. Their European branches could accept time deposits, either on book account or as negotiable CD’s at whatever rate was required to attract them and match them on the asset side of their balance sheet with ‘due from head office.’ The head office could substitute the liability ‘due to foreign branches’ for the liability ‘due on CDs.”

Friedman (1970, 26-7) predicted the future:

“The banks have been forced into costly structural readjustments, the European banking system has been given an unnecessary competitive advantage, and London has been artificially strengthened as a financial center at the expense of New York.”

In short, Depression regulation exported the US financial system to London and offshore centers. What is vividly relevant currently from this experience is the argument by Friedman (1970, 27) that the controls affected the most people with lower incomes and wealth who were forced into accepting controlled-rates on their savings that were lower than those that would be obtained under freer markets. As Friedman (1970, 27) argues:

“These are the people who have the fewest alternative ways to invest their limited assets and are least sophisticated about the alternatives.”

Chart IB-14 of the Bureau of Economic Analysis (BEA) provides quarterly savings as percent of disposable income or the US savings rate from 1980 to 2020. There was a long-term downward sloping trend from 12 percent in the early 1980s to 2.2 percent in Jul 2005. The savings rate then rose during the contraction and in the expansion. In 2011 and into 2012 the savings rate declined as consumption is financed with savings in part because of the disincentive or frustration of receiving a few pennies for every $10,000 of deposits in a bank. The savings rate increased in the final segment of Chart IB-14 in 2012 because of the “fiscal cliff” episode followed by another decline because of the pain of the opportunity cost of zero remuneration for hard-earned savings. There are multiple recent oscillations during expectations of increase or “liftoff” of the fed funds rate in the United States followed by “shallow” or uncertain monetary policy with increase in policy interest rates and reduction of the balance sheet of the Fed. The savings rate increased in the final segment with the annual revisions of 2019. The savings rate jumped in the lockdown of economic activity of the COVID-19 event. The BEA explains (https://www.bea.gov/sites/default/files/2020-05/pi0420_0.pdf): The increase in personal income in April primarily reflected an increase in government social benefits to persons as payments were made to individuals from federal economic recovery programs in response to the COVID-19 pandemic (table 3). For more information, see “How are the economic impact payments for individuals authorized by the CARES Act of 2020 recorded in the NIPAs?” “Other government social benefits to persons” are $3,122.1 billion in Apr 2020 compared with $528.3 billion in Mar 2020 (https://www.bea.gov/sites/default/files/2020-05/pi0420_0.pdf).

clip_image031

Chart IB-14, US, Personal Savings as a Percentage of Disposable Personal Income, Quarterly, 1980-2020

Source: US Bureau of Economic Analysis

https://apps.bea.gov/iTable/index_nipa.cfm

Chart IB-14A provides the US personal savings rate, or personal savings as percent of disposable personal income, on an annual basis from 1929 to 2019. The US savings rate shows decline from around 10 percent in the 1960s to around 8 percent currently.

clip_image033

Chart IB-14A, US, Personal Savings as a Percentage of Disposable Personal Income, Annual, 1929-2019

Source: US Bureau of Economic Analysis

https://apps.bea.gov/iTable/index_nipa.cfm

Table IB-7 provides personal savings as percent of disposable income and annual change of real disposable personal income in selected years since 1930. Savings fell from 4.5 percent of disposable personal income in 1930 to minus 0.7 percent in 1933 while real disposable income contracted 6.3 percent in 1930 and 2.9 percent in 1933. Savings as percent of disposable personal income swelled during World War II to 27.9 percent in 1944 with increase of real disposable income of 3.1 percent. Savings as percent of personal disposable income fell steadily over decades from 12.0 percent in 1982 to 3.2 percent in 2005. Savings as percent of disposable personal income was 6.4 percent in 2013 while real disposable income fell 1.3 percent. The savings rate was 7.3 percent of GDP in 2014 with growth of real disposable income of 4.1 percent. The savings rate was 7.6 percent in 2015 with growth of real disposable income at 4.1 percent. The savings rate stood at 6.8 percent in 2016 with growth of real disposable income at 1.8 percent. The savings rate reached 7.0 percent in 2017 with growth of real disposable income at 2.9 percent. The savings rate stood at 7.7 percent in 2018 with growth of real disposable income at 4.0 percent. The savings rate stood at 7.9 percent in 2019 with growth of real disposable income at 2.9 percent.

Table IB-7, US, Personal Savings as Percent of Disposable Personal Income, Annual, Selected Years 1929-2019

Personal Savings as Percent of Disposable Personal Income

Annual Change of Real Disposable Personal Income

1930

4.5

-6.3

1933

-0.7

-2.9

1944

27.9

3.1

1947

6.3

-4.1

1954

10.3

1.4

1958

11.4

1.0

1960

10.1

2.6

1970

12.8

4.6

1975

13.4

2.5

1982

12.0

2.2

1989

8.4

2.9

1993

7.9

1.7

2002

5.8

3.0

2003

5.6

2.7

2004

5.2

3.3

2005

3.2

1.6

2006

3.8

4.0

2007

3.7

2.3

2008

5.0

1.0

2009

6.1

-0.2

2010

6.5

2.0

2011

7.2

2.3

2012

8.9

3.3

2013

6.4

-1.3

2014

7.3

4.1

2015

7.6

4.1

2016

6.8

1.8

2017

7.0

2.9

2018

7.7

4.0

2019

7.9

2.9

Average Savings Ratio

1980-1989

9.9

2007-2019

6.8

Average Yearly ∆% Real Disposable Income

1980-1989

3.1

2007-2018

2.2

Source: US Bureau of Economic Analysis

https://apps.bea.gov/iTable/index_nipa.cfm

Chart IB-15 of the US Bureau of Economic Analysis provides personal savings as percent of personal disposable income, or savings ratio, from Jan 2007 to May 2020. The savings rate jumped to 12.6 percent in Mar 2020 and 33.2 percent in Apr 2020 in the global recession, with output in the US reaching a high in Feb 2020 (https://www.nber.org/cycles.html), in the lockdown of economic activity in the COVID-19 event. The BEA explains (https://www.bea.gov/sites/default/files/2020-05/pi0420_0.pdf): The increase in personal income in April primarily reflected an increase in government social benefits to persons as payments were made to individuals from federal economic recovery programs in response to the COVID-19 pandemic (table 3). For more information, see “How are the economic impact payments for individuals authorized by the CARES Act of 2020 recorded in the NIPAs?” “Other government social benefits to persons” are $3,122.1 billion in Apr 2020 compared with $528.3 billion in Mar 2020 (https://www.bea.gov/sites/default/files/2020-05/pi0420_0.pdf). The savings rate decreased to 23.2 percent in May 2020.

clip_image035

Chart IB-15, US, Personal Savings as a Percentage of Disposable Income, Monthly 2007-2020

Source: US Bureau of Economic Analysis

https://apps.bea.gov/iTable/index_nipa.cfm

The uncertainties caused by the global recession resulted in sharp increase in the savings ratio that peaked at 7.8 percent in May 2008 (https://apps.bea.gov/iTable/index_nipa.cfm), as shown in Table IB-8. The second peak occurred at 8.2 percent in May 2009. There was another rising trend until 6.9 percent in Jun 2010 and then steady downward trend until 7.0 percent in Nov 2011. This was followed by an upward trend with 9.1 percent in Jun 2012 but decline to 8.0 percent in Aug 2012 followed by jump to 12.0 percent in Dec 2012. Swelling realization of income in Oct-Dec 2012 in anticipation of tax increases in Jan 2013 caused the jump of the savings rate to 12.0 percent in Dec 2012. The BEA explains as “Personal income in November and December was boosted by accelerated and special dividend payments to persons and by accelerated bonus payments and other irregular pay in private wages and salaries in anticipation of changes in individual income tax rates. Personal income in December was also boosted by lump-sum social security benefit payments” (page 2 at http://www.bea.gov/newsreleases/national/pi/2013/pdf/pi1212.pdf). There was a reverse effect in Jan 2013 with decline of the savings rate to 6.3 percent. Real disposable personal income fell 5.8 percent and real disposable per capita income fell from $41,281 in Dec 2012 to $38,886 in Jan 2013 or by 5.8 percent (http://www.bea.gov/iTable/index_nipa.cfm), which is explained by the Bureau of Economic Analysis as follows (page 3 http://www.bea.gov/newsreleases/national/pi/2013/pdf/pi0213.pdf):

“Contributions for government social insurance -- a subtraction in calculating personal income --increased $6.4 billion in February, compared with an increase of $126.8 billion in January. The

January estimate reflected increases in both employer and employee contributions for government social insurance. The January estimate of employee contributions for government social insurance reflected the expiration of the “payroll tax holiday,” that increased the social security contribution rate for employees and self-employed workers by 2.0 percentage points, or $114.1 billion at an annual rate. For additional information, see FAQ on “How did the expiration of the payroll tax holiday affect personal income for January 2013?” at www.bea.gov. The January estimate of employee contributions for government social insurance also reflected an increase in the monthly premiums paid by participants in the supplementary medical insurance program, in the hospital insurance provisions of the Patient Protection and Affordable Care Act, and in the social security taxable wage base; together, these changes added $12.9 billion to January. Employer contributions were boosted $5.9 billion in January, which reflected increases in the social security taxable wage base (from $110,100 to $113,700), in the tax rates paid by employers to state unemployment insurance, and in employer contributions for the federal unemployment tax and for pension guaranty. The total contribution of special factors to the January change in contributions for government social insurance was $132.9 billion.”

Table IB-8, US, Savings Ratio and Real Disposable Income, % and ∆%

Personal Saving as % Disposable Income

RDPI ∆% 12/07

RDPI ∆% Month

RDPI ∆% YOY

May 2008

7.8

4.4

4.8

4.8

May 2009

8.2

2.4

1.7

-1.9

Jun 2010

6.9

2.7

0.2

2.0

Nov 2011

7.0

4.9

0.0

1.4

Jun 2012

9.1

8.3

0.1

3.4

Aug 2012

8.0

7.1

-0.4

2.1

Dec 2012

12.0

12.8

2.5

6.5

Jan 2013

6.3

6.3

-5.8

-0.4

Feb 2013

5.8

5.7

-0.5

-1.5

Mar 2013

5.9

5.9

0.2

-1.7

Apr 2013

6.4

6.3

0.4

-1.6

May 2013

6.7

6.9

0.6

-1.2

Jun 2013

6.8

7.0

0.1

-1.1

Jul 2013

6.6

6.9

-0.1

-0.6

Aug 2013

6.7

7.2

0.2

0.0

Sep 2013

6.8

7.6

0.4

0.0

Oct 2013

6.3

7.3

-0.3

-1.0

Nov 2013

6.2

7.7

0.3

-2.1

Dec 2013

6.4

8.0

0.3

-4.2

Jan 2014

7.1

8.5

0.5

2.1

Feb 2014

7.1

9.2

0.6

3.2

Mar 2014

7.2

9.8

0.5

3.6

Apr 2014

7.2

10.2

0.4

3.6

May 2014

7.4

10.6

0.4

3.4

Jun 2014

7.5

11.1

0.5

3.8

Jul 2014

7.5

11.5

0.3

4.2

Aug 2014

7.3

12.0

0.5

4.5

Sep 2014

7.5

12.3

0.3

4.4

Oct 2014

7.3

12.8

0.4

5.1

Nov 2014

7.4

13.4

0.5

5.3

Dec 2014

7.7

14.1

0.6

5.6

Jan 2015

7.8

14.6

0.5

5.6

Feb 2015

7.9

14.9

0.3

5.3

Mar 2015

7.4

14.6

-0.3

4.4

Apr 2015

7.6

15.2

0.5

4.5

May 2015

7.6

15.6

0.4

4.5

Jun 2015

7.7

15.9

0.2

4.3

Jul 2015

7.6

16.2

0.2

4.2

Aug 2015

7.6

16.4

0.2

3.9

Sep 2015

7.7

16.7

0.2

3.9

Oct 2015

7.7

16.8

0.1

3.5

Nov 2015

7.3

16.6

-0.1

2.8

Dec 2015

7.4

17.0

0.3

2.6

Jan 2016

7.6

17.5

0.4

2.5

Feb 2016

7.1

17.6

0.1

2.3

Mar 2016

7.5

17.7

0.1

2.7

Apr 2016

7.1

17.5

-0.2

2.0

May 2016

6.7

17.4

-0.1

1.5

Jun 2016

6.3

17.4

0.0

1.3

Jul 2016

6.5

17.8

0.3

1.4

Aug 2016

6.5

17.9

0.1

1.3

Sep 2016

6.5

18.2

0.3

1.3

Oct 2016

6.5

18.5

0.2

1.5

Nov 2016

6.5

18.7

0.2

1.8

Dec 2016

6.3

18.9

0.1

1.6

Jan 2017

6.8

19.6

0.6

1.8

Feb 2017

7.1

20.0

0.4

2.1

Mar 2017

7.2

20.6

0.5

2.5

Apr 2017

7.0

20.6

-0.1

2.6

May 2017

7.2

21.1

0.4

3.2

Jun 2017

6.9

21.0

-0.1

3.0

Jul 2017

7.0

21.3

0.3

3.0

Aug 2017

7.1

21.6

0.2

3.1

Sep 2017

6.8

21.9

0.3

3.1

Oct 2017

6.9

22.3

0.3

3.2

Nov 2017

6.7

22.6

0.3

3.3

Dec 2017

6.7

23.2

0.4

3.6

Jan 2018

7.7

24.4

1.0

4.0

Feb 2018

8.0

24.7

0.3

3.9

Mar 2018

8.0

25.2

0.4

3.8

Apr 2018

7.7

25.3

0.1

3.9

May 2018

7.5

25.5

0.2

3.7

Jun 2018

7.6

25.9

0.3

4.1

Jul 2018

7.5

26.3

0.3

4.1

Aug 2018

7.5

26.8

0.4

4.3

Sep 2018

7.5

26.7

0.0

4.0

Oct 2018

7.3

27.0

0.2

3.8

Nov 2018

7.2

27.1

0.1

3.7

Dec 2018

8.8

28.4

0.9

4.2

Jan 2019

8.3

28.4

0.1

3.2

Feb 2019

8.8

29.0

0.4

3.4

Mar 2019

8.4

29.3

0.2

3.3

Apr 2019

8.0

29.2

0.0

3.1

May 2019

7.8

29.3

0.1

3.0

Jun 2019

7.8

29.6

0.2

2.9

Jul 2019

7.4

29.5

-0.1

2.5

Aug 2019

7.7

30.1

0.5

2.6

Sep 2019

7.8

30.5

0.3

3.0

Oct 2019

7.7

30.4

-0.1

2.7

Nov 2019

7.9

31.0

0.4

3.0

Dec 2019

7.7

30.9

-0.1

2.0

Jan 2020

7.9

31.5

0.5

2.4

Feb 2020

8.4

32.0

0.4

2.4

Mar 2020

12.6

29.6

-1.8

0.3

Apr 2020

33.2

47.3

13.6

14.0

May 2020

23.2

40.0

-5.0

8.2

Source: US Bureau of Economic Analysis

https://apps.bea.gov/iTable/index_nipa.cfm

© Carlos M. Pelaez, 2009, 2010, 2011, 2012, 2013, 2014, 2015, 2016, 2017, 2018, 2019, 2020.

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