US | Dec 18, 2020

Personal incomes tumble in every American state in third quarter

/ Our Today

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West Virginia, Michigan, Kentucky and Oklahoma were the worst affected states

New data from the United States’ (US) Department of Commerce have revealed that every state in the country experienced a decline in personal income in the third quarter.

This revelation is not surprising, as it coincides with the winding down in the government’s stimulus packages, thus underscoring the need for fresh aid as Congress moves closer to a deal. The data, which was made public yesterday (December 17), showed West Virginia leading the declines with a contraction of 30 per cent.

West Virginia was followed by Michigan, Kentucky and Oklahoma, which all registered drops exceeding 20 per cent. By comparison, incomes fell by 1.6 per cent in California and less than one percent in the state of Georgia.

America’s personal income declined by 10%

Overall, the personal income of Americans contracted the most since 2013 in the third quarter. The Commerce Department reports that America’s personal income fell 10 per cent at an annual rate in the third quarter. This marked a sharp deceleration from the prior quarter, where there was a 36 per cent jump.

At that time, total income remained higher than a year earlier, before the pandemic hit. Transfer receipts, which include state unemployment benefits and Medicaid, fell by US$1.3 trillion in the third quarter after soaring US$2.4 trillion in the prior period.

According to the data, receipts were boosted earlier in the year by an additional US$600 weekly jobless benefit and US$1,200 stimulus payment. However, the weekly unemployment top-up expired at the end of July, where there was a one-time cheque disbursement.

Benefits of stimulus package

The data pointed to the benefits of the economic stimulus, which came at a time when unemployment was high and a spike in US coronavirus cases. This coupled with fresh restrictions keeping businesses closed and thereby weighing down on hirings.

Congress is nearing a deal on fiscal stimulus with Democrats pushing to include state and local governments that have made cuts amid the income shortfall. In the meantime, additional unemployment benefits expire at the end of the year, as well as an eviction moratorium that has protected some Americans.

The American Commerce Department explained that more recent economic data pointed to a stalled recovery with claims for unemployment benefits unexpectedly jumped to a three-month high last week. Also, US retail sales fell more than forecast in November, highlighting challenges for consumers.


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