The result is that many indicators show an economy that has either fully recovered or is operating at a significantly higher level than before. None of this should minimize the hardships of the approximately 10 million Americans who lost their jobs at the start of the pandemic and remain underemployed, but it is encouraging news for anyone concerned about the sustainability and intensity of the recovery, especially after the disappointing April job report.

The most important feature of the latest data is that April was the second month in a row that spending on goods and services was as high as might have been expected, given how much money Americans earned after taxes working, investing and collecting retirement benefits, but before the Cares Act. , The Coronavirus Relief Bill and the American Rescue Plan Act.

For the first time since January 2020, the average consumer did not stop anything despite a business shutdown or virus transmission. Therefore, the savings rate has already returned to pre-pandemic levels after the reduction of the government’s new income support and debt restructuring programs.

Of course, the actual savings rate has been much higher than this underlying savings rate, which is why Americans together have saved about $ 2.4 trillion more than they would otherwise have at the start of the pandemic. This “extra savings” could help fund the post-pandemic consumption boom, although most of it is likely to have gone to the stock and housing markets and not to consumer consumer checking accounts.

After all, spending is no longer constrained by the ways it can be purchased, which means that total consumer spending is already about 5% higher than before the pandemic. The cost of durable goods such as cars, household appliances, furniture, televisions and fitness equipment is still nearly 40 percent higher than the pre-pandemic. But even the weakened service sector is operating below 2% below the pre-pandemic, with total spending rising 2.1% in March and 1.1% in April.

Americans spent about 4% more money in restaurants in April than before the pandemic on a seasonally adjusted basis, a significant turnaround considering the entire industry. High-frequency data from private sector sources suggest that the trend will continue in the summer, which should help the unemployed return to work if they so wish. But while the overall recovery in services is strong, there are still serious weaknesses, including dental offices, live entertainment, museums, movies and hotels.

Stable spending is primarily supported by rising wages, salaries and benefits for the approximately 150 million Americans who remain in employment. In America, compensation of employees consumed more than 4 percent in April 2020, even though there were fewer employees as payroll calculators. It is unlike any other record recession, especially the global financial crisis that left revenues for years of depression. It is another encouraging sign that favors the sales prospects of all companies.

Small businesses and self-employed people also share the benefits of recovery. Even minus the huge support provided by forgiving Paycheck Protection Program loans, BEA’s “owners’ income ”measure has finally returned to what it was on the eve of the pandemic.

Finally, a note on inflation. The personal consumption expenditure price index released by BEA rose 3.6% year-on-year in April – the largest 12-month rise since 2008. Before the pandemic, PCE inflation was just over 1.8% per year. Acceleration is largely a function of timing, involving some one-off idiosyncrasies associated with a pandemic and reopening.

More than 0.8 percentage points of the overall acceleration of the inflation rate of 1.8 percentage points can be explained by energy prices. But unless the price of West Texas Intermediate oil goes up another $ 100 a barrel – after recovering from a negative $ 37 a barrel to a positive $ 66 a barrel – it won’t happen again. The increase in used cars and car rentals was 0.6 percentage points, simply reflecting the pace of economic recovery that surprised car manufacturers and rental companies.

Other restart categories contributed about 0.2 percentage points to inflation, as their prices were unusually low last April. Most of everything else – which represents the majority of consumer spending – was canceled. Everything is in line with a healthy recovery and nothing more worrying.

Write to Matthew C.Klein at [email protected]

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