Personal income fell -2.7% in August. Still, consumer spending rose 1.0% M/M. What Gives?
The economy is still very much an employment story. While the official U3 unemployment rate fell to 7.9% from 8.4%, the underlying data was, simply put, “ugly!”
Last week, I discussed the theory that the “excess” savings from the stimulus packages (one-time stimulus checks and the now expired supplemental $600/week in unemployment benefits) would carry the economy through Q4. No Way!
The pre-virus savings level was $1.2 trillion. The CARES Act stimulus ballooned savings to $6.40 trillion in April (everything was closed; nothing to spend it on except toilet paper, bottled water, and some frozen entrees). Then the re-openings began. In May, savings fell by -$1.9 trillion. In June, by -$1.0 trillion. Then it levelled off. July was