Bolstered by benefits during the pandemic, what will happen to your income without them?

Economic and Housing Update

COLORADO SPRINGS – During the thick of the pandemic, enhanced unemployment benefits and stimulus checks bolstered Americans’ income over the course of 2020 and well into 2021. Those extra payments, what economists call ‘transfer payments’, led to increased income and more savings.

“A lot of the euphoria that I think you saw even in 2020 and certainly during 2021 with, ‘Hey, we have a really resilient economy,’ and in a lot of ways we do,” Tatiana Bailey, Ph.D. economist and director of the Economic Forum at the University of Colorado-Colorado Springs, said.

Bailey reports income rose 6.2% for Americans in 2020, with Colorado Springs beating the national average at 6.4%.

However, 72% of the additional income in the Pikes Peak region was directly related to those transfer payments, leading Bailey to believe there could be a slow down in the new year without them.

“That sort of dry powder that was out there before, isn’t anymore,” Bailey said.

The ‘dry powder’ also boosted Americans’ saving rates to over 25% in the middle of 2021, the highest point at any given time during this century.

Those rates have now declined to pre-pandemic levels at rates closer to the the historical norm.

“We’re not going to keep pumping money into household balance sheets forever. That ended,” Bailey said. “Couple that with the fact that individuals are not feeling as confident because of inflation, and because they haven’t really seen their real income levels increase. Now you start looking at a scenario where they’re putting the brakes on the amount that they’re spending.”

Bailey forecasts that spending slowdown will trickle affect businesses of all sizes, whether it be corporations or mom and pop shops.

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