Saturday, November 27, 2021

Incomes back to pre-COVID pattern, spending still beating inflation, but virus still an economic problem

I wanted to hit on this week's income and spending report for October, because it gave a picture of a strong economy that seems to be accelerating beyond the alleged drag of inflation, but one that's still bearing scars in some places due to 20 months of the COVID World.

On the income side, we're almost back to a pre-2020 situation in terms of how people get money to spend. Most of the COVID relief measures such as stimulus checks and expanded unemployment have faded, and wage and salary growth has been strong and largely uninterrupted since February, when COVID vaccines started to become more fully available.

Businesses are also seeing their governmment support of PPP 2.0 fade out, but business income has made up for it, and now we have seen business income grow beyond PPP and farm subsidies for the first time in the COVID World.

So now we're starting to see work situations be something that resembles life before COVID (although it may not operate the same way). In addition, spending growth continues to rebound, with each of the last 3 months seeing growth above the rate of inflation, resuming expansion after a few months of flattening out.

But what we spend things on are still different. Real spending in goods outpaced growth in services spending in October as COVID continued to be an overhang in many parts of the country. Some of this was a good sign, as auto spending has finally started to resume after a big drop in Summer, and other goods sectors are also staying well above their pre-COVID levels.

Meanwhile, some types of services spending still remains muted and below pre-COVID levels. This is especially true in the travel and recreation sectors, but bars and restaurants have also hit a wall in recnet months, and is still below its inflation-adusted pre-COVID levels.

So there is evidence that COVID is still keeping some people from spending as much time out at eateries and events as they would have before the pandemic, and the panic in the stock market from yesterday's news about a new variant in (largely unvaxxed) South Africa shows how the threat of a re-worsening pandemic is a major economic concern.

Which makes it all the more vital to get people vaccinated and boosted in this country, especially kids 5-11 (who have been the biggest carriers of the virus in the last few months). And to realize that higher vaccination rates lead to more resilience against both infection and an economic downturn, and that discouraging such a move is encouraging the economy to falter. We need to tell this truth about anti-vax MAGAts and the GOP politicians that root them on.

The last 20 months also should reiterate how we need to have extra supports ready to "turn on" when downturns arrive, as this clearly worked in 2020 and 2021 to keep us coming back from the crater that COVID left to our economy, to the point that demand and hiring could continue to pick up and allow us to recover at a much faster pace than we did in downturns in the 1990s and 2000s.

I'll take a little short-term inflation over years of chronic unemployment and subpar economic performance like we saw in the past. And after seeing oil prices crash on Friday, it's pretty evident that a lot of that "inflation" was nothing more than profiteering, and that can be corrected by ways that don't involve pulling the rug out from under the typical American

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