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If anyone needed proof of what sending most Americans checks would do, the federal Bureau of Economic Analysis proved it: Personal income for the first quarter of 2021 jumped a whopping 59 percent compared to a year ago, driven mostly by a combination of COVID-19 relief from the government and expanded unemployment benefits.
Overall, the national rise in personal income was nearly 60 percent at an annual rate, and Montana was on par with 59.6 percent.
That means for the first quarter, personal income rose substantially. And yet most economists agree the rapid rise is a momentary bump, and not necessarily solely caused by government payments.
“This is just not sustainable,” said Patrick Barkey, the director of the Bureau of Business and Economic Research at the University of Montana.
For example, some workers have seen their pay rise because of a lack of labor, which has put pressure on employers to retain good employees. In some jobs, workers have seen personal income rise by working more hours. Either way, experts expect personal income to readjust as one-time payments and expanded unemployment benefits reduce and the economy fully reopens after the COVID-19 pandemic.
“This reinforces the idea that it has been more of a jobs recession than an income recession,” Barkey said.
And overall economic indicators paint a story of an economy that has more than recovered and is chugging along.
“In terms of income, we’re at more than a comeback,” Barkey said.
He said there’s a difference between overall wages — that is, the total amount of all wages paid to all workers — and the wage rate, or the average amount of money a worker makes. He said rising wage rates will contribute to more income, and may continue upward because of several factors, including people coming back into the work force and a scarcity of labor coupled with strong demand, even as unemployment and one-time payments decrease.
The BEA’s report proves Barkey right. Overall the national average for earnings rose more than 6 percent in the first quarter and 11.5 percent in the last quarter of 2020.
“Earnings increased in 20 of the 24 industries for which BEA prepares quarterly estimates,” the report said.
“This should be a boon to entry-level workers,” Barkey said, as competition for workers intensifies, especially in retail or service sectors.
Finance and insurance, professional, scientific and the technical services all led the growth by sector.
Growth in wages was strongest in Texas, which led the nation at 11.1 percent, and lowest in South Dakota, which saw a 10.2 percent drop in earnings. The report said that eight other states saw significant rises because of a profit-sharing model used in auto contracts.
However, Montana was one of five states that saw an earnings decrease in the first quarter, along with South Dakota, Nebraska, North Dakota and Iowa, driven largely by the decreases in farm earnings due to lower payments from the Coronavirus Food Assistance Program.
Barkey said that rising prices on goods are also the result of pent-up demand.
“We had a padlocked supply,” Barkey said. “It wasn’t a lack of confidence or even ability, but there was a lack of opportunity to spend. This puts a big fat exclamation on the fact that the recession is over, American households have money to spend and reinforces that this has been a supply not a demand recession.”
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