Vital Signs: Income Gets a Lift Thanks to Government Assistance - Real Time Economics - WSJ
The 0.3% increases in personal income posted in January and February
look positive for the future of the consumer sector until one looks at
what’s driving the gains.
Almost half of the increase in personal income in the past two months
has come from bigger government transfer payments even though that
category only accounts for about 16% of all personal income (adjusted
for employer and employee payrolls taxes paid).
Much of the surge in transfers reflects higher Medicaid spending as more people are covered under the Affordable Care Act.
That extra spending has more than offset the decline in unemployment
checks once extended-jobless benefits ended. After the ACA enrollment
period ends, the lift to income should dissipate.
Compensation of employees—mainly paychecks–has grown at a slower
pace, reflecting weaker job growth and minimal pay raises. A more
balanced consumer sector will depend on wages and salaries growing at a
faster clip in coming months.
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