The Key Points Worth Highlighting in the Latest Personal Income Report

By at 1 June, 2021, 1:02 pm


Given the impact of the pandemic and assistance that has been shoveled out the government’s doors to individuals, it’s been hard to take away anything of substance from monthly personal income reports.

Big Fluctuations

For example, in the latest report for April, the U.S. Bureau of Economic Analysis (BEA) reports that so far this year, personal income jumped by 10.2 percent in January, dropped by 6.9 percent in February, leaped by 20.9 percent in March, and declined by 13.1 percent in April. Those huge fluctuations are all about government aid distributed in one month and not in the next.

The BEA noted:

“The decrease in personal income in April primarily reflected a decrease in government social benefits. Within government social benefits, “other” social benefits decreased as economic impact payments made to individuals from the American Rescue Plan Act of 2021 continued, but at a lower level than in March. Unemployment insurance also decreased, led by decreases in payments from the Pandemic Unemployment Compensation program.”

But there are two parts of this monthly report that offer some worthwhile information.

Private Industry Trends Worth Noting

First is wages and salaries in private industry. Following are two charts showing the trends in wages and salaries in private goods producing industries and in services. The good news is the steady recovery in worker earnings, which goes along with the general recovery that has been happening in employment. Although, wages and salaries are running ahead of the return of jobs.

Source: Federal Reserve Bank of St. Louis, FRED

Source: Federal Reserve Bank of St. Louis, FRED

Second is proprietors’ income, or small business owners’ income. What’s striking here is the erratic movements since the pandemic hit. Obviously, there was the initial major drop off in small business income. But subsequently, it has been a roller coaster ride. That has included a major decline in late 2020, and a subsequent move to recover. As of April 2021, though, proprietors’ income remained below the October 2020 level.

Source: Federal Reserve Bank of St. Louis, FRED

The Big Picture on the Latest Data

There are additional points worth highlighting from the personal income report.

First, temporary government aid is just that: temporary. Government assistance is not rooted in output and productivity; indeed, just the opposite. It must be kept in mind that any form of government aid comes with real and significant costs – for taxpayers and for the economy, now and in the future. The quicker the U.S. pulls back from such governmental measures, the better.

Second, true economic recovery and expansion can only be generated by the private sector, namely, from entrepreneurship, businesses reopening and expanding, and the investment that fuels these endeavors.

The up-and-down trend in proprietors’ income is an illustration of the uncertainties, risks and challenges being faced by entrepreneurs and small businesses. At the very least, elected officials shouldn’t be trying to make matters worse by imposing increased costs via higher taxes and more regulation.

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



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