How Government Stimulus Kept People Spending


A massive mailing of government checks at the start of the pandemic kept personal income and spending afloat.

Personal Income and Outlays

The Personal Income and Outlays report for October shows a decline in government stimulus.

Personal Income Synopsis

  • Personal income decreased $130.1 billion (0.7 percent) in October. Disposable personal income (DPI) decreased $134.8 billion (0.8 percent) and personal consumption expenditures (PCE) increased $70.9 billion (0.5 percent).
  • The decrease in personal income in October was led by a decrease in government social benefits. 
  • Within government social benefits, “other” social benefits decreased which primarily reflected a decrease in Lost Wages Supplemental Payments, a Federal Emergency Management Agency program that provides wage assistance to individuals impacted by the pandemic. 
  • Temporary and intermittent decennial Census workers boosted government wages by $3.7 billion in October after adding $9.3 billion in September and $10.9 billion in August. Within farm proprietors’ income, there was an increase in payments under the Coronavirus Food Assistance Program related to supporting farmers and ranchers impacted by COVID-19.

Personal Income in 2020

Personal Income and personal PCTR 2020-11

Personal Current Transfer Receipts

PCTR, the line in green on my chart, consists of Social Security, Medicare, Medicaid, Veterans' Benefits, Unemployment Insurance, and Other.

The first four vary little month to month so I did not plot them. 

The massive surge in "other" in April was due to $1,200 stimulus checks sent to millions of Americans. The first surge was direct deposit, and the rest was mailed checks over time.

Other also got a boost from Pandemic Unemployment Assistance (PUA), and Pandemic Emergency Unemployment Compensation (PEUC). PUA and PEUC expire on December 26.

Personal Income Minus PCTR

Personal Income minus PCTR is down only $27 billion from where it was before the pandemic hit, but an analysis of winners and losers shows how uneven things are.

Winners and Losers

  • Winners: Millions who worked at home and did not lose their job got $1,200 out of the blue and spent it. 
  • Winners: Millions of others in PUA programs made more being unemployed than they did working. They also got a $1,200 check.
  • Winners: Millions of retirees who were not over the fiscal limits also got $1,200 in free money. 
  • Losers: Everyone who lost their job and the check plus PUA did not cover the loss. There are between 15 and 30 million people in this category. 

Fiscal Cliff Looms

Although Personal Income minus PCTR is about where it was pre-pandemic, PCTR is $637 billion above the pre-pandemic level.

That is approximately the monthly amount that would go away by the end of December.

Already millions are out of work and have exhausted all of their unemployment insurance benefits and all of their PEUC.

A fiscal cliff approaches for the losers. 

For further discussion, please see  No Thanksgiving Cheer for the Unemployed.


Comments (9)
No. 1-8

That can explain the stock market rise and spending rise.

155 million workers minus the 15 to 30 PAU benefited. Plus most of the 45 million retirees. Lets use worst case. 155 million workers - 30 PAU + 45 million retirees.

Basically 170 million or 85% Benefited. No wonder XLY has taken off.


The XLY Consumer Discretionary Spending ETF took off in 2009. $36 trillion in bailouts and 5 trillion in M2 supply increase sure can boost an economy.

Add in super low interest rates that reduced mortgage payments and car payments then people have a lot of discretionary income.

Governments have been spending like crazy too. I do not see how the CBs will ever be able to even think about raising interest rates with crashing the economy. We may have super low interest rates for the unseeable future. I still am not ruling out negative interest rates in the future if we hit another crisis.


"Fiscal Cliff Looms"

Just move the goal posts.

Dodge Demon
Dodge Demon

Kamala and Mnuchin were a winning team during the last foreclosure wave in California.


I'm not anti-immigration, we're all immigrants from somewhere, but under these circumstances does it make sense to add headcount except for necessary skilled workers? At least until problems are under better control.


Winners: The already wealthy who were showered with all kinds of Fed monies to speculate in a rising market
Losers: Everybody who is not a winner, since the money obviously produced no extra goods or cash flow based on real (productive) activity


The majority of 'winners' were those that didn't get any checks from the government but also did not lose their jobs and were able to work through the pandemic. As pointed out above - with less entertainment/travel/etc demand on the money they have been making, it makes sense that it would flow into investments or other big-ticket purchases (mostly around home, since that is where everyone is spending their time).


John Edwards was a flawed human being but he was right about there being two Americas - one for the haves and one for the have nots.

Global Economics