A Tale of Two Business Cycles during the Pandemic

One notable aspect of economic developments since the arrival of COVID-19 is the heterogeneous effect the recession has had on different groups within the economy.The following survey statistics were generated from the Census Bureau’s interactive data tool. A U.S. Census survey from early October noted some of the difficulties households were facing:

• 32.2% of adults were living in a household where it had been somewhat or very difficult to pay for usual household expenses during the pandemic.It is worth noting that the Census percentage totals are based on reporting distributions and exclude respondents who did not answer a respective question.
• 6.9% of adults faced housing insecurity, defined as not being current on rent or mortgage or else unlikely to make these payment on time in the following month.
• 23.6% of adults expected someone in their household to have an employment income loss in the next four weeks.

On the other hand, one data series that economists and policymakers follow seems to tell a different story. The FRED chart below plots U.S. monthly real personal income per capita (excluding current government transfers) over the past five years.The data—reported by the Bureau of Economic Analysis—are measured monthly with a relatively short reporting lag, which provides advantages over gross domestic product, the broader measure of economic activity.

The most recent value (as of this blog post’s publish date) is for October and is approximately $42,990.It is seasonally adjusted, measured in 2012 chained dollars and reported at an annual rate. This reflects a sharp reversal of the dramatic decline experienced by income net of transfers in the spring.

Not only has this income measure recovered, but also it is actually above its October 2019 value by about $200. Thus, according to this measure, the aggregate economy is performing slightly better than it did one year ago. This is despite the dire positions in which many of the Census survey respondents find themselves.

Methodology Considerations

Some of the apparent difference may be due to differences in methodologies. This particular Census survey represents a relatively small number of households that, for some questions, are asked to respond to somewhat qualitative questions as well as to give answers about their prospective future economic situations. The personal income data, on the other hand, are drawn from government administrative sources such as the IRS.

Also, personal income data only measure contemporaneous income and are not forward looking. Furthermore, there may be some special circumstances—given the unprecedented nature of the pandemic—that make it difficult to disentangle transfer from non-transfer income, although this merits further consideration.

Nonetheless, the starkly different tales that the monthly national income data tell relative to the Census survey evidence give a sense of the distributional differences the pandemic-induced recession has had within the nation.

Notes and References

1. The following survey statistics were generated from the Census Bureau’s interactive data tool.
2. It is worth noting that the Census percentage totals are based on reporting distributions and exclude respondents who did not answer a respective question.
3. The data—reported by the Bureau of Economic Analysis—are measured monthly with a relatively short reporting lag, which provides advantages over gross domestic product, the broader measure of economic activity.
4. It is seasonally adjusted, measured in 2012 chained dollars and reported at an annual rate.

Additional Resources

• St. Louis Fed’s COVID-19 resource page
• On the Economy: The Real State of Family Wealth: Will COVID-19 Worsen Racial, Educational and Generational Gaps in the U.S.?
• On the Economy: Jobs Hardest Hit by the Pandemic