The latest data on personal income and spending show that the U.S. economy is still gradually recovering from the coronavirus contraction. While much progress has been made since April—thanks in large part to widespread government income support that has mostly expired—there is a still a long way to go.
First, look at the difference between total disposable personal income, which includes government aid, and market income, which includes only income from work and asset ownership. (The narrower indicator is used by the NBER Business Cycle Dating Committee to determine cyclical peaks and troughs.) Before the pandemic, these two measures tracked each other almost perfectly.
Since the Cares Act, however, a large gap has opened between the two indicators, although it is now beginning to close. At the peak in April, disposable personal income was 24.5% larger than market