Coronavirus stimulus payments helped to heighten Americans’ personal income by 10% in January, according to data from the Bureau of Economic Analysis. Employee compensation and personal savings rates increased as well, mainly due to the Coronavirus Response and Relief Supplemental Appropriations Act, says the National Association of Home Builders. Employee compensation grew from 0.5% in December 2020 and inched up 0.7% in January. Disposable income, meaning income after taxes and inflation, increased 11% in January from a meager 0.2% increase in December.
Real disposable income (income remaining after adjusting for taxes and inflation) was up 11% after a 0.2% increase in December 2020, marking the largest monthly gains since May 2020. Personal consumption expenditures (PCE) rose 2.4% in January after a decline of 0.4% in December 2020.
In January, the rise in personal income pushed the personal savings rate to 20.5%, compared to a record high savings rate of 33.7% in April 2020 Personal savings remained elevated at an annual pace of $3.93 billion, the highest level after May 2020.