Personal Income Report for May: Private Wages and Small Business Income Turn Up

By at 27 June, 2020, 2:20 pm

by Raymond J. Keating-

Looking at the latest personal income report from the U.S. Bureau of Economic Analysis, one has to look at what’s happening, or not happening, in the real economy, versus what’s been artificially and temporarily juiced up by government aid in response to the pandemic and government shut downs.

The top line numbers in the May data only tell us so much. For what they’re worth, personal income fell by 4.2 percent, after a jump of 10.8 percent in April due to government aid dollars and a decline of 2.2 percent in March.

The story was similar with real disposable personal income (i.e., personal income less current personal taxes and adjusted for inflation), which declined by 5 percent in May, after growing by 13.6 percent in April and falling by 1.8 percent in March.

After aid dollars went out from the government and the economy started to reopen in May, it wasn’t surprising to see personal consumption expenditures grow by 8.1 percent in real terms in May, after declines of 12.2 percent in April and 6.4 percent in March.

In the end, the most interesting pieces of data in this May income report are wages and salaries in private industries, and proprietors’ income (i.e., small business income).

After taking big dives in March (-4.4 percent) and April (-8.5 percent), private wages and salaries grew (+3.7%) in May.

The same trend went for proprietors’ income. After drops in March (-8.0 percent) and April (-12.7 percent), May experienced some growth (+2.8 percent).

Source: Federal Reserve Bank of St. Louis, FRED

While recognizing that the hole to climb out of is deep, as well the persistent uncertainties tied to the pandemic, the turn up in private wages and salaries, small business income, and consumption in May provide additional hope that the climb perhaps has begun.

Raymond J. Keating is chief economist for the Small Business & Entrepreneurship Council.


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