Record spending growth still leaves us far in the hole. And our help from DC is running out.

These three paragraphs from a story on Friday are an excellent example of the weird economic times we have fallen in. When you can set a record for spending growth, and it still disappoints.

Consumer spending leaped a record 8.2% in May to mark the first increase since the coronavirus pandemic drubbed the economy, but fading government stimulus payments, still-high unemployment and a fresh viral outbreak are likely to muzzle similarly large gains in the months ahead.

The increase in spending fell short of the 10% forecast of economists polled by MarketWatch.

The reopening of business activity in May in several states released a barrage of pentup demand as Americans were able to get out and about for the first time in several months.

As for the spending side, much like we saw with the retail sales figures for May, it involved some recovery of the steep losses we had seen in the last few months. But on an inflation-adjusted basis, we are still down more than 11% compared to the rate we were at in February. And spending in services is still significantly down, as restaurants, bars, non-COVID health care and entertainment industries are still significantly depressed.

FYI- the uptick in durable goods is mostly cars and RVs, while March's gains from people rushing to buy non-durable goods at grocery stores has faded, and gasoline sales remain low.

That same report from the Bureau of Economic Analysis also said that we had a sizable decline in income of 4.2% in America over that same month, even though 2.5 million jobs were added back. How?

The decrease in personal income in May primarily reflected a decrease in government social benefits to persons as payments made to individuals from federal economic recovery programs in response to the COVID-19 pandemic continued, but at a lower level than in April (table 3).

In particular, the drop came from most people having gotten their stimulus checks in April, and not getting another in May. Conversely, there was a sizable increase in unemployment benefits paid, which dwarfed the increase in income that resulted from more people working in May.

Most of that increase in unemployment benefits reflects the $600 supplement kicking in for the entire month (+$691.9 billion) and some more was the result of more people getting unemployment through the PUA program ($101.5 billion).

And while there might be further help in spending with more places open for the entire month of June, as COVID-19 resurges and bars close in Texas and Florida, we now are in danger of seeing spending get stuck at this lower level.

Back on the income side, this graph should show remind you how much less people were getting in paychecks in May, both from hours being cut or many millions not having a job at all. The thing keeping incomes afloat are these aids from the government.

Now spin it forward. If COVID’s resurgence means even more shutdowns and layoffs, and the major income sources of enhanced unemployment benefits and stimulus checks are both scheduled to go away in the next 4 weeks, do you really think this economy is going to survive?

Even before we see the effect of higher COVID cases and related business shutdowns, we already are having more Americans not being able to pay their mortgages back.

After declining for three weeks, the number of borrowers delaying their monthly mortgage payments due to the coronavirus rose sharply once again.

The number of active forbearance plans rose by 79,000 in the past week, erasing roughly half of the improvement seen since the peak of May 22, according to Black Knight, a mortgage data and technology firm. By comparison, the number of borrowers in forbearance plans fell by 57,000 the previous week. Increases happened every day for the past five business days.

As of Tuesday, 4.68 million homeowners were in forbearance plans, allowing them to delay their mortgage payments for at least three months. This represents 8.8% of all active mortgages, up from 8.7% last week. Together, they represent just over $1 trillion in unpaid principal.

So we're in a significant economic deficit as the 1st half of 2020 ends. And if Moscow Mitch and other Senate GOPs refuse to add money to everyday people’s wallets in July? Disaster. I think even McConnell recognizes that it’ll be economic and political suicide to do nothing, as today even the Grim Reaper is saying some kind of stimulus might happen in the next month.

When you dig into economic reports and combine it with the rising COVID-19 numbers, it sure seems like we are teetering on the edge of ending the slight recovery that we saw in May and June. We could well fall further in Q3 2020 if there’s no help coming from DC, and we’re still pretty far down as it is.