Personal income soared by 10% from December 2020 to January 2021 thanks in large part to government stimulus benefits, according to a new analysis from the U.S. Bureau of Economic Analysis (BEA).
The December 2020 Covid-19 relief bill provided $600 stimulus payments for many individuals and extended key federal unemployment benefits. The BEA finds those two social benefits "more than account" for the rise in income in January.
Many Americans put some of that extra income to good use right away: Consumer spending increased by 2.4% in January, with an estimated $277.2 billion more going to durable goods like vehicles and food, and an estimated $63.7 billion more going toward services like eating out.
Many also saved some of their benefits. The personal savings rate surged to 20.5% in January, up from 13.4% the month prior. Americans now have an estimated $3.9 trillion in savings — up from $1.38 trillion in February 2020.
The report does not explain how the increased savings and spending are distributed among different income levels or households, or between those who are employed or unemployed. While many Americans are still struggling to pay their bills amid the ongoing pandemic-induced economic downturn, plenty of others have kept their jobs and been able to save their stimulus payments. The savings rate is high, but not uniformly so.
The findings come as Congress put together the next Covid-19 relief bill. Expected to pass the House on Friday, the bill will include another round of stimulus checks for many households, as well as an extension of key federal unemployment benefits.