The most recent data release from the Bureau of Economic Analysis (BEA) showed that personal income decreased in August to a seasonally adjusted annual rate (SAAR) of $19,493 billion. It dropped 2.7% in August due to the expiration of the expanded unemployment insurance benefit, which provided a weekly supplement payment of $600 for the unemployed through the end of July. In addition, personal income from wages and salaries increased 1.3%, as the economy continued to reopen.
Real disposable income (income remaining after adjusting for taxes and inflation) was down 3.5% in August after remaining flat in July and a dip of 2.0% in June. Despite the drop in August, real disposable income was 2.8% above its level in February, the month before the “stay-at-home” orders due to the pandemic. Personal consumption expenditures (PCE) rose 1.0% in August. However, PCE was still 1.9% lower than a year ago.
In August, the rise in consumer spending and the drop in personal income drew the personal savings rate down to 14.1%, compared to a record high savings rate of 33.6% in April. Personal savings stood at $2.4 billion (SAAR) in August, still almost 75% above the level before the pandemic hit the economy.