According to Josh Mitchell of the WSJ, statistics compiled by the Bureau of Economic Analysis estimated personal income increased 10% during January, the second largest month-to-month increase on record. Also, consumer spending increased by 2.4%, leading the economy off to a great start for the year.
Consumer spending coupled with additional recovery actions are expected to return the economy to pre-pandemic levels as the labor market is still recovering.
In late December, a $900 billion stimulus program was implemented to send $600 payments to most households. While unemployment did decrease during January, unemployed workers have been receiving an additional weekly $300 to normal unemployment benefits.
Consumer spending, the primary source of American economic growth, declined at the end of last year as virus infections rose and downscaling occurred across the country. The effect of the spring 2020 stimulus bill had also diminished.
However, upper-income and wealthy households have high savings available for spending as the current personal saving rate jumped 7% in January. The House recently passed the $1.9 trillion stimulus relief bill known as the American Rescue Plan. Restrictions have also eased as the rate of new infections has been in decline.
Spending has been sustained during the pandemic as consumers have been buying relatively long-lasting goods such as cars and other products online. There has also been much investment in homes in either buying or renovating with new appliances. The service and tourism industries are expected to return to form in the spring as vaccines are administered in the millions.