Personal incomes rose 0.3% in this morning’s income and spending data. The savings rate drop 0.5%, but there is quite a nugget that Dan Greenhaus of BTIG found in the spending data. If not for government transfers there would be no income growth at all. This is really no surprise for FMMF readers as we noted long ago that 1 in 6 dollars of U.S. income on average was coming from the government (back in 2009) and it’s only gotten worse.
Dan Greenhaus of BTIG notes that personal income, excluding transfer payments, was flat in July. A big part of “transfer payments” is government assistance — unemployment benefits and the like.
here has been a disturbing upward stickiness of the amount of government support to the economy. … the percentage of incomes provided by government transfer payments has remained elevated. What this implies is that for a large segment of the economy, the government is subsidizing consumption levels. To some degree, that is to be expected in recessions and difficult economic environments but over time, this runs the risk of become entrenched. Ultimately, that would be a negative for job growth, income growth, productivity and the economy more generally.
Like Dan said, if this was a 1-2 year situation to deal with the Great Recession it would be one thing, but this has now become an entrenched way of life for many Americans. And there is no turnaround in site.
And it’s not just individuals becoming dependent on the federal dole.