Monday, January 4, 2021

Recovering GDP of Major World Economies Still Underperforming Below Trend, Cyclically Stagnating US Real Disposable Income Per Capita, Financial Repression, Rules, Discretionary Authorities and Slow Productivity Growth, Destruction of Household Nonfinancial Wealth with Stagnating Total Real Wealth in the Lost Economic Cycle of the Global Recession with Economic Growth Underperforming Below Trend Worldwide, Collapse of United States Dynamism of Income Growth and Employment Creation in the Lost Economic Cycle of the Global Recession with Economic Growth Underperforming Below Trend Worldwide, World Cyclical Slow Growth, and Government Intervention in Globalization: Part I


Recovering GDP of Major World Economies Still Underperforming Below Trend, Cyclically Stagnating US Real Disposable Income Per Capita, Financial Repression, Rules, Discretionary Authorities and Slow Productivity Growth, Destruction of Household Nonfinancial Wealth with Stagnating Total Real Wealth in the Lost Economic Cycle of the Global Recession with Economic Growth Underperforming Below Trend Worldwide, Collapse of United States Dynamism of Income Growth and Employment Creation in the Lost Economic Cycle of the Global Recession with Economic Growth Underperforming Below Trend Worldwide, 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 Stagnating Real Disposable Income and Consumption Expenditures

IIB1 Stagnating Real Disposable Income and Consumption Expenditures

IB2 Financial Repression

II Rules, Discretionary Authorities and Slow Productivity Growth

IIB Destruction of Household Nonfinancial Wealth with Stagnating Total Real Wealth in the Lost Economic Cycle of the Global Recession with Economic Growth Underperforming Below Trend Worldwide

II IB Collapse of United States Dynamism of Income Growth and Employment Creation in the Lost Economic Cycle of the Global Recession with Economic Growth Underperforming Below Trend Worldwide

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

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/2020/12/us-gdp-growing-at-saar-334-percent-in.html and earlier https://cmpassocregulationblog.blogspot.com/2020/11/dollar-devaluation-increasing.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).

The BEA provides the annual update of the National Income and Product Accounts on Jul 31, 2020 (https://www.bea.gov/sites/default/files/2020-07/pi0620.pdf): “The estimates released today also reflect the results of the Annual Update of the National Income and

Product Accounts (NIPAs). The timespan of the update is the first quarter of 2015 through the fourth quarter of 2019 for estimates of real GDP and its major components, and the first quarter of 1999 through the fourth quarter of 2019 for estimates of income and saving. The reference year remains 2012. More information on the 2020 Annual Update is included in the May Survey of Current Business article, “GDP and the Economy.””

The emphasis is now shifting to 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. In the first wave, nominal personal income increased at 2.4 percent in Jan 2019 while nominal disposable personal income decreased at 1.2 percent. Nominal personal consumption expenditures increased at 8.7 percent. Real disposable income changed at 0.0 percent and real personal consumption expenditures increased at 8.7 percent. In the second wave, nominal personal income increased at 4.3 percent in Feb-Mar 2019 while nominal disposable personal income increased at 3.0 percent. Nominal personal consumption expenditures increased at 6.2 percent. Real disposable income increased at 0.6 percent and real personal consumption expenditures increased at 4.3 percent. In the third wave, nominal personal income increased at 2.0 percent in Apr-Jun 2019 while nominal disposable income increased at 1.6 percent. Nominal personal consumption expenditures increased at 4.9 percent. Real disposable income decreased at 1.2 percent and real personal consumption expenditures increased at 2.8 percent. In the fourth wave, nominal personal income increased at 1.2 percent annual equivalent in Jul 2019 while nominal disposable income increased at 3.7 percent. Nominal personal consumption increased at 4.9 percent. Real disposable income increased at 1.2 percent and real personal consumption expenditures increased at 2.4 percent. In the fifth wave, nominal personal income increased at 4.3 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 3.7 percent and real personal consumption expenditures increased at 1.8 percent. In the sixth wave, nominal personal income increased at 3.7 percent annual equivalent in Oct-Dec 2019 while nominal disposable income increased at 2.8 percent. Nominal personal consumption increased at 3.7 percent. Real disposable income increased at 0.8 percent and real personal consumption expenditures increased at 1.2 percent. In the seventh wave, nominal personal income increased at 10.7 percent annual equivalent in Jan-Feb 2020 while nominal disposable income increased at 10.0 percent. Nominal personal consumption increased at 3.7 percent. Real disposable income increased at 8.1 percent and real personal consumption expenditures increased at 1.8 percent. In the eighth 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 80.8 percent annual equivalent in Mar-Apr 2020 while nominal disposable income increased at 108.7 percent. Nominal personal consumption decreased at 70.8 percent. Real disposable income increased at 119.3 percent and real personal consumption expenditures decreased at 69.6 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 ninth 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 26.8 percent annual equivalent in May-Jun 2020 while nominal disposable income decreased at 33.2 percent. Nominal personal consumption increased at 140.7 percent. Real disposable income decreased at 33.2 percent and real personal consumption expenditures increased at 130.1 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.” The BEA explains as follows (https://www.bea.gov/sites/default/files/2020-07/pi0620.pdf): “The decrease in personal income in June was more than accounted for by a decrease in government social benefits to persons as payments made to individuals from federal economic recovery programs in response to the COVID-19 pandemic continued, but at a lower level than in May (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? Partially offsetting the decrease in other government social benefits were increases in compensation of employees and proprietors’ income as portions of the economy continued to reopen in June.

Unemployment insurance benefits, based primarily on unemployment claims data from the Department of Labor’s Employment and Training Administration, also increased in June. For more information, see “How will the expansion of unemployment benefits in response to the COVID-19 pandemic be recorded

in the NIPAs?”.” In the ninth 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 11.4 percent annual equivalent in Jul 2020 while nominal disposable income increased at 10.0 percent. Nominal personal consumption increased at 19.6 percent. Real disposable income increased at 6.2 percent and real personal consumption expenditures increased at 15.4 percent. The BEA explains as follows (https://www.bea.gov/sites/default/files/2020-08/pi0720.pdf): “The July 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 June,

and government “stay-at-home” orders lifted in some areas of the country. The full economic

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

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

identified. For more information, see Effects of Selected Federal Pandemic Response Programs on Personal Income. The increase in personal income in July was more than accounted for by compensation of employees as portions of the economy continued to reopen (table 3). Proprietors’ income and rental income of persons also contributed to the increase. Partially offsetting these increases were decreases in government social benefits and income on assets.

Unemployment insurance benefits, based primarily on unemployment claims data from the Department of Labor’s Employment and Training Administration, decreased in July. For more information, see “How will federal government responses to the COVID-19 pandemic affect unemployment insurance benefits?”.” In the tenth 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 27.1 percent annual equivalent in Aug 2020 while nominal disposable income decreased at 31.5 percent. Nominal personal consumption increased at 15.4 percent. Real disposable income decreased at 33.1 percent and real personal consumption expenditures increased at 11.4 percent. The BEA explains as follows (https://www.bea.gov/sites/default/files/2020-10/pi0820.pdf): “The decrease in personal income in August was more than accounted for by a decrease in

unemployment insurance benefits, based primarily on unemployment claims data from the Department of Labor’s Employment and Training Administration (table 3). In particular, the Federal Pandemic Unemployment Compensation program which provided a temporary weekly supplemental payment of $600 for those receiving unemployment benefits expired on July 31. For more information, see “How

will federal government responses to the COVID-19 pandemic affect unemployment insurance

benefits?”. Partially offsetting the decrease in unemployment insurance benefits was an increase in compensation in August. Government wage and salary disbursements increased $17.5 billion in August, following an increase of $14.5 billion in July. Temporary and intermittent Census decennial workers boosted government wages and salaries by $10.8 billion in August.” In the eleventh 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 10.0 percent annual equivalent in Sep 2020 while nominal disposable income increased at 10.0 percent. Nominal personal consumption increased at 16.8 percent. Real disposable income increased at 7.4 percent and real personal consumption expenditures increased at 14.0 percent. The BEA explains the process (https://www.bea.gov/sites/default/files/2020-10/pi0920.pdf). In the eleventh 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 9.7 percent annual equivalent in Oct-Nov 2020 while nominal disposable income decreased at 10.8 percent. Nominal personal consumption decreased at 0.6 percent. Real disposable income decreased at 11.9 percent and real personal consumption expenditures decreased at 0.6 percent. The BEA explains the process (https://www.bea.gov/sites/default/files/2020-11/pi1020.pdf and https://www.bea.gov/sites/default/files/2020-12/pi1120.pdf).

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 1.8 percent on average in the cyclical expansion in the 45 quarters from IIIQ2009 to IIIQ2020 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 IIIQ2020 (https://www.bea.gov/sites/default/files/2020-12/gdp3q20_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/2020/12/us-gdp-growing-at-saar-334-percent-in.html and earlier https://cmpassocregulationblog.blogspot.com/2020/11/dollar-devaluation-increasing.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 IIIQ1992, 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, 3.7 percent from IQ1983 to IVQ1993, 3.7 percent from IQ1983 to IQ1994 and at 7.9 percent from IQ1983 to IVQ1983 (https://cmpassocregulationblog.blogspot.com/2020/12/us-gdp-growing-at-saar-334-percent-in.html and earlier https://cmpassocregulationblog.blogspot.com/2020/11/dollar-devaluation-increasing.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 IIIQ2020 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 45.8 percent. GDP in IIIQ2020 would be $22,981.0 billion (in constant dollars of 2012) if the US had grown at trend, which is higher by $4384.5 billion than actual $18,596.5 billion. There are more than four trillion dollars of GDP less than at trend, explaining the 31.2 million unemployed or underemployed equivalent to actual unemployment/underemployment of 18.0 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 (https://cmpassocregulationblog.blogspot.com/2020/12/dollar-devaluation-increasing.html and earlier https://cmpassocregulationblog.blogspot.com/2020/11/increase-in-oct-2020-of-nonfarm-payroll.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/covid19/employment-situation-covid19-faq-november-2020.htm). US GDP in IIIQ2020 is 19.1 percent lower than at trend. US GDP grew from $15,762.0 billion in IVQ2007 in constant dollars to $18,596.5 billion in IIIQ2020 or 18.0 percent at the average annual equivalent rate of 1.3 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 Nov 1919 to Nov 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 156.6710 in Nov 2020. The actual index NSA in Nov 2020 is 100.6075 which is 35.8 percent below trend. The underperformance of manufacturing in Mar-Aug 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 164.7223 in Nov 2020. The actual index NSA in Nov 2020 is 100.6075, which is 38.9 percent below trend. Manufacturing output grew at average 1.8 percent between Dec 1986 and Nov 2020. Using trend growth of 1.8 percent per year, the index would increase to 136.3637 in Nov 2020. The output of manufacturing at 100.6075 in Nov 2020 is 26.2 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 101.9023 in Nov 2020 or 18.0 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 166.3617 in Nov 2020. The NAICS index at 101.9023 in Nov 2020 is 38.7 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 132.6282 in Nov 2020. The NAICS index at 101.9023 in Nov 2020 is 23.2 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

Nov 2020

-1.1

-1.2

-1.3

-0.4

-0.4

Oct

-0.6

-0.7

-0.8

0.3

0.3

AE ∆% Oct-Nov

-9.7

-10.8

-11.9

-0.6

-0.6

Sep

0.8

0.8

0.6

1.3

1.1

AE ∆% Sep

10.0

10.0

7.4

16.8

14.0

Aug

-2.6

-3.1

-3.3

1.2

0.9

AE ∆% Aug

-27.1

-31.5

-33.1

15.4

11.4

Jul

0.9

0.8

0.5

1.5

1.2

AE ∆% Jul

11.4

10.0

6.2

19.6

15.4

Jun

-1.1

-1.4

-1.8

6.5

5.9

May

-4.0

-4.7

-4.8

8.7

8.5

AE ∆% May-Jun

-26.8

-31.2

-33.2

140.7

130.1

Apr

12.4

15.0

15.6

-12.7

-12.3

Mar

-1.8

-1.7

-1.4

-6.7

-6.5

AE ∆% Mar-Apr

80.8

108.7

119.3

-70.8

-69.6

Feb

0.8

0.7

0.6

0.0

-0.1

Jan

0.9

0.9

0.7

0.6

0.4

AE ∆% Jan-Feb

10.7

10.0

8.1

3.7

1.8

Dec 2019

0.1

0.0

-0.2

0.3

0.0

Nov

0.5

0.5

0.4

0.2

0.1

Oct

0.3

0.2

0.0

0.4

0.2

AE ∆% Oct-Dec

3.7

2.8

0.8

3.7

1.2

Sep

0.2

0.2

0.1

0.2

0.1

Aug

0.5

0.6

0.5

0.3

0.2

AE ∆% Aug-Sep

4.3

4.9

3.7

3.0

1.8

Jul

0.1

0.3

0.1

0.4

0.2

AE ∆% Jul

1.2

3.7

1.2

4.9

2.4

Jun

0.2

0.2

0.1

0.4

0.3

May

0.1

0.1

-0.1

0.3

0.2

Apr

0.2

0.1

-0.3

0.5

0.2

AE ∆% Apr-Jun

2.0

1.6

-1.2

4.9

2.8

Mar

0.3

0.2

-0.1

0.9

0.7

Feb

0.4

0.3

0.2

0.1

0.0

AE ∆% Feb-Mar

4.3

3.0

0.6

6.2

4.3

Jan

0.2

-0.1

0.0

0.7

0.7

AE ∆% Jan

2.4

-1.2

0.0

8.7

8.7

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

Real disposable income increased 3.1 percent in the 12 months ending in Nov 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/2020-12/pi1120.pdf): “The decrease in personal income in November primarily reflected decreases in proprietors’ income (both nonfarm and farm) and government social benefits that were partly offset by an increase in compensation (table 3). Within government social benefits, “other” social benefits decreased, which primarily reflected

a decrease in Lost Wages Supplemental Payments, a Federal Emergency Management Agency

program that provides wage assistance to individuals impacted by the pandemic. Within compensation, the main contributor was an increase in wages and salaries in service producing

industries.” RPCE growth decelerated sharply to minus 2.4 percent in Nov 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 real durable goods 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. In Nov 2020, RPCEG increased 7.4 percent in 12 months and RPCEGD increased 12.1 percent while RPCES decreased 6.7 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

Nov

3.1

-2.4

7.4

12.1

-6.7

Oct

4.9

-1.8

8.5

14.7

-6.4

Sep

5.7

-1.9

8.5

13.3

-6.6

Aug

5.2

-2.9

6.7

13.0

-7.2

Jul

9.4

-3.6

6.5

12.2

-8.1

Jun

8.9

-4.6

5.8

11.0

-9.2

May

11.1

-9.6

0.6

3.1

-14.2

Apr

16.7

-16.5

-11.5

-18.7

-18.7

Mar

0.6

-4.7

1.6

-8.2

-7.5

Feb

2.0

2.6

3.9

6.8

2.0

Jan

1.5

2.7

3.8

7.5

2.2

2019

Dec

0.8

3.0

5.2

8.4

2.1

Nov

2.1

2.1

2.4

3.9

1.9

Oct

1.8

2.3

3.6

4.9

1.7

Sep

2.0

2.6

4.2

6.0

1.9

Aug

1.8

2.3

4.2

5.1

1.5

Jul

1.6

2.6

4.4

5.1

1.7

Jun

1.9

2.6

4.4

5.1

1.7

May

2.0

2.3

3.3

4.6

1.9

Apr

2.4

2.4

3.9

4.5

1.8

Mar

2.9

2.5

3.6

4.7

2.0

Feb

3.4

2.2

2.5

2.2

2.1

Jan

3.5

2.2

3.0

3.3

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 points in IIQ2020 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 with sharp recovery in IIIQ2020.

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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-five quarters of expansion that began in IIIQ2009. The data point in IIQ2020 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 followed by sharp recovery in IIIQ2020.

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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. (1) Decrease in Nov 2020 of personal income by $221.8 billion or 1.1 percent and decrease of disposable income of $218.0 billion or 1.2 percent with increase of wages and salaries of 0.4 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/2020-12/pi1120.pdf): “The decrease in personal income in November primarily reflected decreases in proprietors’ income (both nonfarm and farm) and government social benefits that were partly offset by an increase in compensation (table 3). Within government social benefits, “other” social benefits decreased, which primarily reflected

a decrease in Lost Wages Supplemental Payments, a Federal Emergency Management Agency

program that provides wage assistance to individuals impacted by the pandemic. Within compensation, the main contributor was an increase in wages and salaries in service producing

industries.” (2) Increase of personal income of $537.8 billion from Dec 2018 to Dec 2019 or 2.9 percent and increase of disposable income of $402.0 billion or 2.5 percent with increase of wages and salaries of 4.2 percent.

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 %

Nov 2020

19,493.3

9,622.0

2,215.7

17,277.6

12.9

Oct 2020

19,715.1

9,582.9

2,219.5

17,495.6

13.6

Change Nov 2020/     

Oct 2020

-221.8 ∆% -1.1

39.1

∆% 0.4

-3.8 ∆%

-0.2

-218.0 ∆% -1.2

Dec 2019

18,800.5

9,456.5

2,232.7

16,567.8

7.2

Change Dec 2019/Dec 2018

537.8 ∆% 2.9

384.4 ∆% 4.2

135.9 ∆% 6.5

402.0 ∆% 2.5

Dec 2018

18,262.7

9,072.1

2,096.8

16,165.8

9.1

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 2.5 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 1.4 percent. Real disposable income grew at 2.2 percent from 2007 to 2019 and real disposable income per capita at 1.4 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

2.5

     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

1.4

2007-2019

1.4

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 1994. 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_image006

Chart IB-3, US, Personal Income, Billion Dollars, Quarterly Seasonally Adjusted at Annual Rates, 1980-1994

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 5.6 percent while nominal disposable income grew at 4.3 percent and at 6.1 percent in real terms (Table 14 at https://www.bea.gov/sites/default/files/2020-07/pi0620.pdf). In IIQ2015, nominal personal income grew at 3.8 percent while nominal disposable income grew at 3.2 percent and real disposable income grew at 1.1 percent (Table 14 at https://www.bea.gov/sites/default/files/2020-07/pi0620.pdf). In IIIQ2015, nominal personal income grew at 3.5 percent while nominal disposable income grew at 3.9 percent and real disposable income grew at 2.8 percent (Table 14 at https://www.bea.gov/sites/default/files/2020-07/pi0620.pdf). In IVQ2015, nominal personal income grew at 2.2 percent while nominal disposable income grew at 2.0 percent and real disposable income at 2.3 percent (Table 14 at https://www.bea.gov/sites/default/files/2020-07/pi0620.pdf). In IQ2016, personal income grew at 2.0 percent while nominal disposable income grew at 3.4 percent and real disposable income grew at 3.1 percent (Table 14 at https://www.bea.gov/sites/default/files/2020-07/pi0620.pdf). In IIQ2016, personal income grew at 2.4 percent while nominal disposable income grew at 2.1 percent and real disposable income fell at 0.3 percent (Table 14 at https://www.bea.gov/sites/default/files/2020-07/pi0620.pdf). In IIIQ2016, personal income grew at 3.8 percent while nominal disposable income grew at 3.6 percent and real disposable income grew at 1.9 percent (Table 14 at https://www.bea.gov/sites/default/files/2020-07/pi0620.pdf). In IVQ2016, nominal personal income grew at 4.4 percent while disposable income grew at 4.4 percent and real disposable income increased at 2.5 percent (Table 14 at https://www.bea.gov/sites/default/files/2020-07/pi0620.pdf). In IQ2017, nominal personal income grew at 6.1 percent while nominal disposable income grew at 6.6 percent and real disposable income at 4.3 percent (Table 14 at https://www.bea.gov/sites/default/files/2020-07/pi0620.pdf). In IIQ2017, nominal personal income grew at 4.8 percent while nominal disposable income grew at 5.3 percent and real disposable income at 2.4 percent (Table 14 at https://www.bea.gov/sites/default/files/2020-07/pi0620.pdf). In IIIQ2017, nominal personal income grew at 5.0 percent while nominal disposable income grew at 4.4 percent and real disposable personal income grew at 2.7 percent (Table 14 at https://www.bea.gov/sites/default/files/2020-07/pi0620.pdf). In IVQ2017, nominal personal income grew at 6.2 percent while nominal disposable income grew at 5.0 percent and real disposable personal income grew at 2.3 percent (Table 14 at https://www.bea.gov/sites/default/files/2020-07/pi0620.pdf). In IQ2018, nominal personal income grew at 6.0 percent while nominal disposable income grew at 8.0 percent and real disposable income grew at 5.2 percent (Table 14 at https://www.bea.gov/sites/default/files/2020-07/pi0620.pdf). In IIQ2018, nominal personal income grew at 4.7 percent while nominal disposable income grew at 4.9 percent and real disposable income grew at 3.6 percent (Table 14 at https://www.bea.gov/sites/default/files/2020-07/pi0620.pdf). In IIIQ2018, nominal personal income grew at 5.2 percent while nominal disposable income grew at 4.9 percent and real disposable income grew at 3.3 percent (Table 14 at https://www.bea.gov/sites/default/files/2020-07/pi0620.pdf). In IVQ2018, nominal personal income grew at 3.5 percent while nominal disposable income grew at 4.2 percent and real disposable income grew at 2.8 percent (Table 14 at https://www.bea.gov/sites/default/files/2020-07/pi0620.pdf). In IQ2019, nominal personal income grew at 5.3 percent and at 3.3 real percent excluding transfer receipts while nominal disposable income grew at 3.9 percent and real disposable income grew at 3.3 percent (Table 6 at https://www.bea.gov/sites/default/files/2020-10/pi0820.pdf). In IIQ2019, nominal personal income grew at 2.5 percent and at minus 0.4 real percent excluding transfer receipts while nominal disposable income grew at 1.5 percent and real disposable income grew at minus 1.0 percent (Table 6 at https://www.bea.gov/sites/default/files/2020-12/pi1120.pdf). In IIIQ2019, nominal personal income grew at 2.6 percent and at 1.0 real percent excluding transfer receipts 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/2020-12/pi1120.pdf). In IVQ2019, nominal personal income grew at 3.6 percent and at 2.4 percent real excluding current transfers while nominal disposable income grew at 3.4 percent and real disposable income grew at 1.9 percent (Table 6 at https://www.bea.gov/sites/default/files/2020-12/pi1120.pdf). In IQ2020, nominal personal income grew at 4.1 percent and increased at 1.5 percent real excluding current transfers while nominal disposable income grew at 3.9 percent and real disposable income grew at 2.6 percent (Table 6 at https://www.bea.gov/sites/default/files/2020-12/pi1120.pdf). In IIQ2020, nominal personal income grew at 35.8 percent and decreased at 20.5 percent real excluding current transfers while nominal disposable income grew at 46.2 percent and real disposable income grew at 48.6 percent (Table 6 at https://www.bea.gov/sites/default/files/2020-12/pi1120.pdf). In IIIQ2020, nominal personal income decreased at 10.2 percent and increased at 18.1 percent real excluding current transfers while nominal disposable income decreased at 13.2 percent and real disposable income decreased at 16.3 percent (Table 6 at https://www.bea.gov/sites/default/files/2020-12/pi1120.pdf).

clip_image008

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 1994. 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_image010

Chart IB-5, US, Real Disposable Income, Billions of Chained 2009 Dollars, Quarterly Seasonally Adjusted at Annual Rates 1980-1994

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 5.6 percent while nominal disposable income grew at 4.3 percent and at 6.1 percent in real terms (Table 14 at https://www.bea.gov/sites/default/files/2020-07/pi0620.pdf). In IIQ2015, nominal personal income grew at 3.8 percent while nominal disposable income grew at 3.2 percent and real disposable income grew at 1.1 percent (Table 14 at https://www.bea.gov/sites/default/files/2020-07/pi0620.pdf). In IIIQ2015, nominal personal income grew at 3.5 percent while nominal disposable income grew at 3.9 percent and real disposable income grew at 2.8 percent (Table 14 at https://www.bea.gov/sites/default/files/2020-07/pi0620.pdf). In IVQ2015, nominal personal income grew at 2.2 percent while nominal disposable income grew at 2.0 percent and real disposable income at 2.3 percent (Table 14 at https://www.bea.gov/sites/default/files/2020-07/pi0620.pdf). In IQ2016, personal income grew at 2.0 percent while nominal disposable income grew at 3.4 percent and real disposable income grew at 3.1 percent (Table 14 at https://www.bea.gov/sites/default/files/2020-07/pi0620.pdf). In IIQ2016, personal income grew at 2.4 percent while nominal disposable income grew at 2.1 percent and real disposable income fell at 0.3 percent (Table 14 at https://www.bea.gov/sites/default/files/2020-07/pi0620.pdf). In IIIQ2016, personal income grew at 3.8 percent while nominal disposable income grew at 3.6 percent and real disposable income grew at 1.9 percent (Table 14 at https://www.bea.gov/sites/default/files/2020-07/pi0620.pdf). In IVQ2016, nominal personal income grew at 4.4 percent while disposable income grew at 4.4 percent and real disposable income increased at 2.5 percent (Table 14 at https://www.bea.gov/sites/default/files/2020-07/pi0620.pdf). In IQ2017, nominal personal income grew at 6.1 percent while nominal disposable income grew at 6.6 percent and real disposable income at 4.3 percent (Table 14 at https://www.bea.gov/sites/default/files/2020-07/pi0620.pdf). In IIQ2017, nominal personal income grew at 4.8 percent while nominal disposable income grew at 5.3 percent and real disposable income at 2.4 percent (Table 14 at https://www.bea.gov/sites/default/files/2020-07/pi0620.pdf). In IIIQ2017, nominal personal income grew at 5.0 percent while nominal disposable income grew at 4.4 percent and real disposable personal income grew at 2.7 percent (Table 14 at https://www.bea.gov/sites/default/files/2020-07/pi0620.pdf). In IVQ2017, nominal personal income grew at 6.2 percent while nominal disposable income grew at 5.0 percent and real disposable personal income grew at 2.3 percent (Table 14 at https://www.bea.gov/sites/default/files/2020-07/pi0620.pdf). In IQ2018, nominal personal income grew at 6.0 percent while nominal disposable income grew at 8.0 percent and real disposable income grew at 5.2 percent (Table 14 at https://www.bea.gov/sites/default/files/2020-07/pi0620.pdf). In IIQ2018, nominal personal income grew at 4.7 percent while nominal disposable income grew at 4.9 percent and real disposable income grew at 3.6 percent (Table 14 at https://www.bea.gov/sites/default/files/2020-07/pi0620.pdf). In IIIQ2018, nominal personal income grew at 5.2 percent while nominal disposable income grew at 4.9 percent and real disposable income grew at 3.3 percent (Table 14 at https://www.bea.gov/sites/default/files/2020-07/pi0620.pdf). In IVQ2018, nominal personal income grew at 3.5 percent while nominal disposable income grew at 4.2 percent and real disposable income grew at 2.8 percent (Table 14 at https://www.bea.gov/sites/default/files/2020-07/pi0620.pdf). In IQ2019, nominal personal income grew at 5.3 percent and at 3.3 real percent excluding transfer receipts while nominal disposable income grew at 3.9 percent and real disposable income grew at 3.3 percent (Table 6 at https://www.bea.gov/sites/default/files/2020-10/pi0820.pdf). In IIQ2019, nominal personal income grew at 2.5 percent and at minus 0.4 real percent excluding transfer receipts while nominal disposable income grew at 1.5 percent and real disposable income grew at minus 1.0 percent (Table 6 at https://www.bea.gov/sites/default/files/2020-12/pi1120.pdf). In IIIQ2019, nominal personal income grew at 2.6 percent and at 1.0 real percent excluding transfer receipts 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/2020-12/pi1120.pdf). In IVQ2019, nominal personal income grew at 3.6 percent and at 2.4 percent real excluding current transfers while nominal disposable income grew at 3.4 percent and real disposable income grew at 1.9 percent (Table 6 at https://www.bea.gov/sites/default/files/2020-12/pi1120.pdf). In IQ2020, nominal personal income grew at 4.1 percent and increased at 1.5 percent real excluding current transfers while nominal disposable income grew at 3.9 percent and real disposable income grew at 2.6 percent (Table 6 at https://www.bea.gov/sites/default/files/2020-12/pi1120.pdf). In IIQ2020, nominal personal income grew at 35.8 percent and decreased at 20.5 percent real excluding current transfers while nominal disposable income grew at 46.2 percent and real disposable income grew at 48.6 percent (Table 6 at https://www.bea.gov/sites/default/files/2020-12/pi1120.pdf). In IIIQ2020, nominal personal income decreased at 10.2 percent and increased at 18.1 percent real excluding current transfers while nominal disposable income decreased at 13.2 percent and real disposable income decreased at 16.3 percent (Table 6 at https://www.bea.gov/sites/default/files/2020-12/pi1120.pdf).

clip_image012

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 1994. 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_image014

Chart IB-7, US, Real Disposable Income Percentage Change from Preceding Period at Quarterly Seasonally Adjusted Annual Rates, 1980-1994

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 5.6 percent while nominal disposable income grew at 4.3 percent and at 6.1 percent in real terms (Table 14 at https://www.bea.gov/sites/default/files/2020-07/pi0620.pdf). In IIQ2015, nominal personal income grew at 3.8 percent while nominal disposable income grew at 3.2 percent and real disposable income grew at 1.1 percent (Table 14 at https://www.bea.gov/sites/default/files/2020-07/pi0620.pdf). In IIIQ2015, nominal personal income grew at 3.5 percent while nominal disposable income grew at 3.9 percent and real disposable income grew at 2.8 percent (Table 14 at https://www.bea.gov/sites/default/files/2020-07/pi0620.pdf). In IVQ2015, nominal personal income grew at 2.2 percent while nominal disposable income grew at 2.0 percent and real disposable income at 2.3 percent (Table 14 at https://www.bea.gov/sites/default/files/2020-07/pi0620.pdf). In IQ2016, personal income grew at 2.0 percent while nominal disposable income grew at 3.4 percent and real disposable income grew at 3.1 percent (Table 14 at https://www.bea.gov/sites/default/files/2020-07/pi0620.pdf). In IIQ2016, personal income grew at 2.4 percent while nominal disposable income grew at 2.1 percent and real disposable income fell at 0.3 percent (Table 14 at https://www.bea.gov/sites/default/files/2020-07/pi0620.pdf). In IIIQ2016, personal income grew at 3.8 percent while nominal disposable income grew at 3.6 percent and real disposable income grew at 1.9 percent (Table 14 at https://www.bea.gov/sites/default/files/2020-07/pi0620.pdf). In IVQ2016, nominal personal income grew at 4.4 percent while disposable income grew at 4.4 percent and real disposable income increased at 2.5 percent (Table 14 at https://www.bea.gov/sites/default/files/2020-07/pi0620.pdf). In IQ2017, nominal personal income grew at 6.1 percent while nominal disposable income grew at 6.6 percent and real disposable income at 4.3 percent (Table 14 at https://www.bea.gov/sites/default/files/2020-07/pi0620.pdf). In IIQ2017, nominal personal income grew at 4.8 percent while nominal disposable income grew at 5.3 percent and real disposable income at 2.4 percent (Table 14 at https://www.bea.gov/sites/default/files/2020-07/pi0620.pdf). In IIIQ2017, nominal personal income grew at 5.0 percent while nominal disposable income grew at 4.4 percent and real disposable personal income grew at 2.7 percent (Table 14 at https://www.bea.gov/sites/default/files/2020-07/pi0620.pdf). In IVQ2017, nominal personal income grew at 6.2 percent while nominal disposable income grew at 5.0 percent and real disposable personal income grew at 2.3 percent (Table 14 at https://www.bea.gov/sites/default/files/2020-07/pi0620.pdf). In IQ2018, nominal personal income grew at 6.0 percent while nominal disposable income grew at 8.0 percent and real disposable income grew at 5.2 percent (Table 14 at https://www.bea.gov/sites/default/files/2020-07/pi0620.pdf). In IIQ2018, nominal personal income grew at 4.7 percent while nominal disposable income grew at 4.9 percent and real disposable income grew at 3.6 percent (Table 14 at https://www.bea.gov/sites/default/files/2020-07/pi0620.pdf). In IIIQ2018, nominal personal income grew at 5.2 percent while nominal disposable income grew at 4.9 percent and real disposable income grew at 3.3 percent (Table 14 at https://www.bea.gov/sites/default/files/2020-07/pi0620.pdf). In IVQ2018, nominal personal income grew at 3.5 percent while nominal disposable income grew at 4.2 percent and real disposable income grew at 2.8 percent (Table 14 at https://www.bea.gov/sites/default/files/2020-07/pi0620.pdf). In IQ2019, nominal personal income grew at 5.3 percent and at 3.3 real percent excluding transfer receipts while nominal disposable income grew at 3.9 percent and real disposable income grew at 3.3 percent (Table 6 at https://www.bea.gov/sites/default/files/2020-10/pi0820.pdf). In IIQ2019, nominal personal income grew at 2.5 percent and at minus 0.4 real percent excluding transfer receipts while nominal disposable income grew at 1.5 percent and real disposable income grew at minus 1.0 percent (Table 6 at https://www.bea.gov/sites/default/files/2020-12/pi1120.pdf). In IIIQ2019, nominal personal income grew at 2.6 percent and at 1.0 real percent excluding transfer receipts 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/2020-12/pi1120.pdf). In IVQ2019, nominal personal income grew at 3.6 percent and at 2.4 percent real excluding current transfers while nominal disposable income grew at 3.4 percent and real disposable income grew at 1.9 percent (Table 6 at https://www.bea.gov/sites/default/files/2020-12/pi1120.pdf). In IQ2020, nominal personal income grew at 4.1 percent and increased at 1.5 percent real excluding current transfers while nominal disposable income grew at 3.9 percent and real disposable income grew at 2.6 percent (Table 6 at https://www.bea.gov/sites/default/files/2020-12/pi1120.pdf). In IIQ2020, nominal personal income grew at 35.8 percent and decreased at 20.5 percent real excluding current transfers while nominal disposable income grew at 46.2 percent and real disposable income grew at 48.6 percent (Table 6 at https://www.bea.gov/sites/default/files/2020-12/pi1120.pdf). In IIIQ2020, nominal personal income decreased at 10.2 percent and increased at 18.1 percent real excluding current transfers while nominal disposable income decreased at 13.2 percent and real disposable income decreased at 16.3 percent (Table 6 at https://www.bea.gov/sites/default/files/2020-12/pi1120.pdf).

clip_image016

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 Nov 2020 at the seasonally adjusted annual rate of $19,493.3 billion, as shown in Table IB-3 above (see Table 1 at https://www.bea.gov/sites/default/files/2020-12/pi1120.pdf). The major portion of personal income is compensation of employees of $11,784.9billion, or 60.5 percent of the total. Wages and salaries are $9,622.0 billion, of which $8,185.8 billion by private industries and supplements to wages and salaries of $2,162.9 billion (contributions to government social insurance are $675.0 billion). “Other government social benefits to persons” are $632.4 billion in Nov 2020 compared with $3,379.3 billion in Apr 2020 (https://www.bea.gov/sites/default/files/2020-12/pi1120.pdf). In Apr 1994 (at the comparable month after the 45th quarter of cyclical expansion), US personal income was $5,896.8 billion at SAAR (https://apps.bea.gov/iTable/index_nipa.cfm). Compensation of employees was $3,982.1 billion, or 67.5 percent of the total. Wages and salaries were $3,215.7 billion of which $2,610.5 billion by private industries. Supplements to wages and salaries were $766.4 billion with employer contributions to pension and insurance funds of $514.4 billion and $252.0 billion to government social insurance. Chart IB-9 provides US wages and salaries by private industries in the 1980s and 1990-1994. 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_image018

Chart IB-9, US, Wages and Salaries, Private Industries, Quarterly, Seasonally Adjusted at Annual Rates Billions of Dollars, 1980-1994

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 Nov 2020 at the seasonally adjusted annual rate of $19,493.3 billion, as shown in Table IB-3 above (see Table 1 at https://www.bea.gov/sites/default/files/2020-12/pi1120.pdf). The major portion of personal income is compensation of employees of $11,784.9billion, or 60.5 percent of the total. Wages and salaries are $9,622.0 billion, of which $8,185.8 billion by private industries and supplements to wages and salaries of $2,162.9 billion (contributions to government social insurance are $675.0 billion). “Other government social benefits to persons” are $632.4 billion in Nov 2020 compared with $3,379.3 billion in Apr 2020 (https://www.bea.gov/sites/default/files/2020-12/pi1120.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_image020

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 after 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_image022

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 1994. 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_image024

Chart IB-12, US, Real Disposable Per Capita Income, Monthly, Seasonally Adjusted at Annual Rates, Chained 2009 Dollars 1980-1994

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 20.8 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 30.0 percent from Dec 1979 to Feb 1994. 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 Feb 2020, real per capita disposable income increased 20.8 percent. The YOY increase of real per capita income in Mar 2020 of 0.1 percent, the increase of 16.1 percent in Apr 2020, the increase of 10.6 percent in May 2020, the increase of 8.4 percent in Jun 2020, the increase of 8.9 percent in Jul 2020, the increase of 4.8 percent in Aug 2020, the increase of 5.3 percent in Sep 2020, the increase of 4.7 percent in Oct 2020 and the increase of 5.2 percent in Nov 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 as follows (https://www.bea.gov/sites/default/files/2020-11/pi1020.pdf): “The decrease in personal income in October was led by a decrease in government social benefits (table 3). Within government social benefits, “other” social benefits decreased which primarily reflected a decrease in Lost Wages Supplemental Payments, a Federal Emergency Management Agency program that provides wage assistance to individuals impacted by the pandemic. Offsetting the decrease in government social benefits were increases in compensation and proprietors’ income (led by farm). Within compensation, an increase in private wages and salaries was partly offset by a decrease in government wages and salaries, which decreased $8.4 billion in October, following a decrease of $8.2 billion in September and an increase of $22.8 billion in August. Temporary and intermittent decennial Census workers boosted government wages by $3.7 billion in October after adding $9.3 billion in September and $10.9 billion in August. Within farm proprietors’ income, there was an increase in payments under the Coronavirus Food Assistance Program related to supporting farmers and ranchers impacted by COVID-19.” There is further explanation by the BEA (https://www.bea.gov/sites/default/files/2020-12/pi1120.pdf).

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

3.6

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

6/1989

24.5

1.6

12/2015

10.3

2.1

6/1990

26.9

1.9

12/2016

11.4

1.0

6/1991

25.7

-0.9

12/2017

14.6

2.8

6/1992

29.5

3.0

12/2018

18.9

3.8

7/1992

29.2

3.1

1/2019

18.9

3.0

8/1992

29.5

3.3

2/2019

19.0

2.9

9/1992

28.8

2.5

3/2019

18.9

2.4

10/1992

27.8

1.7

04/2019

18.6

1.9

11/1992

27.9

1.7

05/2019

18.5

1.6

12/1992

32.3

4.4

06/2019

18.5

1.4

1/1993

29.3

1.1

07/2019

18.6

1.1

2/1993

29.8

1.1

08/2019

19.1

1.3

3/1993

29.2

0.7

09/2019

19.2

1.5

4/1993

29.8

0.9

10/2019

19.2

1.3

5/1993

29.5

0.3

11/2019

19.6

1.6

6/1993

29.1

-0.3

12/2019

19.3

0.3

7/1993

29.2

0.0

1/2020

20.1

1.1

8/1993

29.3

-0.2

2/2020

20.8

1.5

9/1993

28.8

0.0

3/2020

19.1

0.1

10/1993

28.0

0.2

4/2020

37.7

16.1

11/1993

28.2

0.3

5/2020

31.0

10.6

12/1993

32.5

0.2

6/2020

28.5

8.4

1/1994

29.9

0.5

7/2020

29.1

8.9

2/1994

30.0

0.2

8/2020

24.7

4.7

3/1994

30.3

0.9

9/2020

25.4

5.2

4/1994

30.2

0.3

10/2020

24.4

4.4

5/1994

31.6

1.6

11/2020

22.8

2.6

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. There is increase of 0.6 percent in Sep 2020 followed by decrease of 0.8 percent in Oct 2020 and contraction of 1.3 percent in Nov 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 as follows (https://www.bea.gov/sites/default/files/2020-11/pi1020.pdf): “The decrease in personal income in October was led by a decrease in government social benefits (table 3). Within government social benefits, “other” social benefits decreased which primarily reflected a decrease in Lost Wages Supplemental Payments, a Federal Emergency Management Agency program that provides wage assistance to individuals impacted by the pandemic. Offsetting the decrease in government social benefits were increases in compensation and proprietors’ income (led by farm). Within compensation, an increase in private wages and salaries was partly offset

by a decrease in government wages and salaries, which decreased $8.4 billion in October, following a decrease of $8.2 billion in September and an increase of $22.8 billion in August. Temporary and intermittent decennial Census workers boosted government wages by $3.7 billion in October after adding $9.3 billion in September and $10.9 billion in August. Within farm proprietors’ income, there was an increase in payments under the Coronavirus Food Assistance Program related to supporting farmers and ranchers impacted by COVID-19.” There is further explanation (https://www.bea.gov/sites/default/files/2020-12/pi1120.pdf).

clip_image026

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 31.4 percent from Dec 2007 to Feb 2020 (column RDPI ∆% 12/07). In the same period, real disposable income per capita increased 20.8 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 34.0 percent from Dec 2007 to Nov 2020 (column RDPI ∆% 12/07). In the same period, real disposable income per capita increased 22.8 percent (column RDPI-PC ∆% 12/07). Growth of real disposable income of minus 1.3 percent in Nov 2020 and growth of minus 1.3 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 as follows (https://www.bea.gov/sites/default/files/2020-11/pi1020.pdf): “The decrease in personal income in October was led by a decrease in government social benefits (table 3). Within government social benefits, “other” social benefits decreased which primarily reflected a decrease in Lost Wages Supplemental Payments, a Federal Emergency Management Agency program that provides wage assistance to individuals impacted by the pandemic. Offsetting the decrease in government social benefits were increases in compensation and proprietors’ income (led by farm). Within compensation, an increase in private wages and salaries was partly offset

by a decrease in government wages and salaries, which decreased $8.4 billion in October, following a decrease of $8.2 billion in September and an increase of $22.8 billion in August. Temporary and intermittent decennial Census workers boosted government wages by $3.7 billion in October after adding $9.3 billion in September and $10.9 billion in August. Within farm proprietors’ income, there was an increase in payments under the Coronavirus Food Assistance Program related to supporting farmers and ranchers impacted by COVID-19.” There is further explanation (https://www.bea.gov/sites/default/files/2020-12/pi1120.pdf).

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

0.8

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

-1.2

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

3.7

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

3.6

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

12/15

17.2

0.5

2.8

10.3

0.4

2.1

12/16

19.2

0.2

1.7

11.4

0.1

1.0

12/17

23.3

0.2

3.4

14.6

0.1

2.8

12/18

28.6

1.0

4.3

18.9

1.0

3.8

1/19

28.6

0.0

3.5

18.9

0.0

3.0

2/19

28.8

0.2

3.4

19.0

0.1

2.9

3/19

28.7

-0.1

2.9

18.9

-0.1

2.4

04/19

28.4

-0.3

2.4

18.6

-0.3

1.9

05/19

28.3

-0.1

2.0

18.5

-0.1

1.6

06/19

28.5

0.1

1.9

18.5

0.1

1.4

07/19

28.6

0.1

1.6

18.6

0.0

1.1

08/19

29.2

0.5

1.8

19.1

0.4

1.3

09/19

29.4

0.1

2.0

19.2

0.1

1.5

10/19

29.4

0.0

1.8

19.2

0.0

1.3

11/19

29.9

0.4

2.1

19.6

0.4

1.6

12/19

29.6

-0.2

0.8

19.3

-0.3

0.3

01/20

30.6

0.7

1.5

20.1

0.7

1.1

02/20

31.4

0.6

2.0

20.8

0.6

1.5

03/20

29.5

-1.4

0.6

19.1

-1.4

0.1

04/20

49.8

15.6

16.7

37.7

15.6

16.1

05/20

42.6

-4.8

11.1

31.0

-4.9

10.6

06/20

39.9

-1.8

8.9

28.5

-1.9

8.4

07/20

40.7

0.5

9.4

29.1

0.5

8.9

08/20

36.0

-3.3

5.2

24.7

-3.4

4.7

09/20

36.8

0.6

5.7

25.4

0.5

5.2

10/20

35.7

-0.8

4.9

24.4

-0.8

4.4

11/20

34.0

-1.3

3.1

22.8

-1.3

2.6

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 1.2 percent in the 12 months ending in Nov 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/2020/12/us-gdp-growing-at-saar-334-percent-in.html and earlier https://cmpassocregulationblog.blogspot.com/2020/11/dollar-devaluation-increasing.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 and 2020. The savings rate jumped followed by decline in the lockdown of economic activity of the COVID-19 event. The BEA explains as follows (https://www.bea.gov/sites/default/files/2020-11/pi1020.pdf): “The decrease in personal income in October was led by a decrease in government social benefits (table 3). Within government social benefits, “other” social benefits decreased which primarily reflected a decrease in Lost Wages Supplemental Payments, a Federal Emergency Management Agency program that provides wage assistance to individuals impacted by the pandemic. Offsetting the decrease in government social benefits were increases in compensation and proprietors’ income (led by farm). Within compensation, an increase in private wages and salaries was partly offset

by a decrease in government wages and salaries, which decreased $8.4 billion in October, following a decrease of $8.2 billion in September and an increase of $22.8 billion in August. Temporary and intermittent decennial Census workers boosted government wages by $3.7 billion in October after adding $9.3 billion in September and $10.9 billion in August. Within farm proprietors’ income, there was an increase in payments under the Coronavirus Food Assistance Program related to supporting farmers and ranchers impacted by COVID-19.” There is further explanation (https://www.bea.gov/sites/default/files/2020-12/pi1120.pdf).

clip_image028

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_image030

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 3.1 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 7.4 percent of GDP in 2014 with growth of real disposable income of 4.1 percent. The savings rate was 7.5 percent in 2015 with growth of real disposable income at 4.2 percent. The savings rate stood at 6.9 percent in 2016 with growth of real disposable income at 2.0 percent. The savings rate reached 7.2 percent in 2017 with growth of real disposable income at 3.1 percent. The savings rate stood at 7.8 percent in 2018 with growth of real disposable income at 3.6 percent. The savings rate stood at 7.5 percent in 2019 with growth of real disposable income at 2.2 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

5.5

2.7

2004

5.1

3.3

2005

3.1

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

7.4

4.1

2015

7.5

4.2

2016

6.9

2.0

2017

7.2

3.1

2018

7.8

3.6

2019

7.5

2.2

Average Savings Ratio

1980-1989

9.9

2007-2019

6.2

Average Yearly ∆% Real Disposable Income

1980-1989

3.1

2007-2018

2.4

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 Nov 2020. The savings rate jumped to 12.9 percent in Mar 2020 and 33.7 percent in Apr 2020, decreasing to 24.7 percent in May 2020, 19.0 percent in Jun 2020, 18.5 percent in Jul 2020, 15.0 percent in Aug 2020, 14.4 percent in Sep 2020, 13.6 percent in Oct 2020 and 12.9 percent in Nov 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/2020-11/pi1020.pdf): “The decrease in personal income in October was led by a decrease in government social benefits (table 3). Within government social benefits, “other” social benefits decreased which primarily reflected a decrease in Lost Wages Supplemental Payments, a Federal Emergency Management Agency program that provides wage assistance to individuals impacted by the pandemic. Offsetting the decrease in government social benefits were increases in compensation and proprietors’ income (led by farm). Within compensation, an increase in private wages and salaries was partly offset

by a decrease in government wages and salaries, which decreased $8.4 billion in October, following a decrease of $8.2 billion in September and an increase of $22.8 billion in August. Temporary and intermittent decennial Census workers boosted government wages by $3.7 billion in October after adding $9.3 billion in September and $10.9 billion in August. Within farm proprietors’ income, there was an increase in payments under the Coronavirus Food Assistance Program related to supporting farmers and ranchers impacted by COVID-19.” There is further explanation (https://www.bea.gov/sites/default/files/2020-12/pi1120.pdf).

clip_image032

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 6.9 percent in Nov 2011. This was followed by an upward trend with 9.1 percent in Jun 2012 but decline to 7.9 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

6.9

4.9

0.0

1.4

Jun 2012

9.1

8.3

0.1

3.4

Aug 2012

7.9

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

-1.2

Jul 2013

6.6

6.9

-0.1

-0.6

Aug 2013

6.7

7.2

0.2

0.1

Sep 2013

6.8

7.6

0.4

0.0

Oct 2013

6.2

7.3

-0.3

-1.0

Nov 2013

6.1

7.7

0.3

-2.1

Dec 2013

6.4

8.0

0.3

-4.2

Dec 2014

7.7

14.1

0.6

5.6

Dec 2015

7.3

17.2

0.5

2.8

Dec 2016

6.4

19.2

0.2

1.7

Dec 2017

6.6

23.3

0.2

3.4

Dec 2018

9.1

28.6

1.0

4.3

Dec 2019

7.2

29.6

-0.2

0.8

Jan 2020

7.6

30.6

0.7

1.5

Feb 2020

8.3

31.4

0.6

2.0

Mar 2020

12.9

29.5

-1.4

0.6

Apr 2020

33.7

49.8

15.6

16.7

May 2020

24.7

42.6

-4.8

11.1

Jun 2020

19.0

39.9

-1.8

8.9

Jul 2020

18.5

40.7

0.5

9.4

Aug 2020

15.0

36.0

-3.3

5.2

Sep 2020

14.4

36.8

0.6

5.7

Oct 2020

13.6

35.7

-0.8

4.9

Nov 2020

12.9

34.0

-1.3

3.1

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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