U.S. Personal Income Soared in April, Not Consumer Spending

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New numbers from the commerce department show consumer spending plunged more than thirteen percent in April the steepest drop since the government began to keep records more than sixty years ago and it's an ominous signal for a country where consumer spending is the main driver of economic activity and here Scott Horsley joins us Scott thanks so much for being with us good morning where their particular kinds of spending that dried up in April or was it pretty much across the board it was really widespread Scott of course that's partly because there weren't a lot of opportunities to spend money lots of restaurants and retail shops were closed so we saw a sharp drop in in just about every kind of purchase spending at barber shops and beauty parlors alike was down by seventy four percent even healthcare spending which is usually pretty recession proof plunged by twenty nine percent last month a lot of doctors and dentists offices were closed for all but emergency appointments for and how much of the cutting spending we seem to have been driven by the massive layoffs you know there was a pretty steep drop in paychecks last month either because people were laid off or or even those are working have their hours cut many cases but what's interesting is that was more than offset by huge spike in government relief payments between the unemployment benefits and those twelve hundred dollar stimulus checks that went out Americans overall personal income actually shot up last month by more than ten percent we just wound up banking some of that extra income overall Americans saved about a third of their disposable income last month that's about four times the usual savings rate now some of that might have been involuntary savings by people who just couldn't go out to a movie or a ball game as they would like to do but it also could reflect people deliberately squirrelly money away in anticipation of lean months ahead and now that more businesses and more states are opening their doors in many parts of the country should we look for spending to come back to it's gonna be interesting to watch if you think about it a revival of consumer spending is gonna depend on three things one is the opportunity to spend too is money in consumers pockets to spend and then three is just the confidence that it's safe to go out and spend money we are starting to see more opportunities as as businesses open their doors as far as money in your pocket you know some people are going back to work but with double digit unemployment wages are likely to remain depressed for awhile to calm and we can't necessarily count on the government to make up the gap with those big relief payments in the twelve hundred dollar payments are gone they're not set to be repeated and the extra six dollars a week in unemployment benefits the Congress authorized during the pandemic those are due to run out at the end of July so ability to spend is kind of a question mark he also said that consumers have to feel safe about being able to go out and spend money how do we judge that right now that's the big unknown and of course it depends in part on the path of the pandemic this is something for reserve chairman Jerome Powell talked about yesterday in a webcast hosted by Princeton University a full recovery of the economy will really depend on people being confident that it's safe to go out and say to engage in a broad range of economic activities that's how the economy will recover and eat you see people testing the limits now probably every day all of us are doing things you might not have done two months ago and you're just seeing how that works we're in the midst of a big national experiment some people gonna respect their favorite restaurant as soon as the doors open others are gonna be more cautious and the some of those millions of individual decisions will determine the direction the economy we know we're in a deep hole right now the big question is how soon can we climb

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