As stimulus fades, we see who the COVID economy is helping, and hurting

As many of us buy stuff during this week of sales, it seems important to look at this week's release of the October 2020 income and spending report to get an idea of where things stood ahead of a Holiday shopping season that will likely look very different than any we've seen in our lifetimes.

For both statistics, we saw a reversion back toward pre-COVID numbers as stimulus measures fade away and consumption continues to recover from its Springtime depths.

Personal income decreased $130.1 billion (0.7 percent) in October according to estimates released today by the Bureau of Economic Analysis(tables 3 and 5). Disposable personal income(DPI) decreased $134.8 billion (0.8percent) and personal consumption expenditures(PCE) increased $70.9 billion (0.5 percent).

Real DPI decreased 0.8 percent in October and Real PCE increased 0.5 percent (tables 5 and 7). The PCE price index was unchanged from September. The PCE price index excluding food and energy was also unchanged.

That drop in personal income is due to the ending of the short-term bump in unemployment benefits caused by President Trump's desperate raid on FEMA funds in August. Take that out, and personal incomes would have risen by nearly $80 billion (annual rate) last month.

That being said, all of that remaining increase in income can be chalked up to another pre-election giveaway, in the form of major farm subsidies that went out in October to try to make rurals forget about 4 years of bad Trump/GOP policies that led to record bankruptcies in Wisconsin (and judging by the election results, I guess it worked).

Meanwhile, growth in wages and salaries has continued to diminish in recent months, and as you can see, that main source of income for most Americans still isn't back to the levels that they were at in February. By comparison, business owners are back above water, and have been seeing steady growth since things hit bottom in April.

November's income story should prove especially interesting, as unemployment claims have started to rise again, as COVID spikes and the weather cools. But it's without the boost in unemployment benefits that we had in May, June and July.

On the spending side, we continue to see a two-sided story. The increased amount of people staying home and the fact that middle and upper-income Americans have barely seen their incomes hit at all in the COVID World has become a boon to quite a few goods-related industries. Spending on goods is well above the levels that we had in pre-COVID February, vehicles have become especially hot in recent months, and we are still spending an elevated level on groceries and booze.

But notice that services spending was still depressed in October, and growth continues to flatten out. With COVID Winter looming, it's not looking much better for the future, which makes for an alarming situation given what a hole many of these businesses are already in.

Those lower sales are not going to pay the rent, which makes me think we are in serious danger of havig a 2nd phase of significant job loss and closings in those sectors. And this time, they won't be temporary, which tells me that Congress needs to step up in the next 2 weeks to get the bipartisan RESTAURANTS Act and related, targeted measures pushed through Moscow Mitch's legislative graveyard.

If that happens, then we might not get back above February's income and spending levels for the rest of 2020, and for quite a while afterwards. Keep an eye on DC, and see if that reality of looming doule-dip recession sparks the GOPs into action. Or if they walk away, and try to screw Biden even more than Treasury Secretary Mnuchin is already doing.