Personal income just hit a record high spending

Personal income jumped by more than $4 trillion last month, a record 21.1 percent increase, the Bureau of Economic Analysis reported on Friday. Economists had been predicting a spike as stimulus payments reached people’s bank accounts and the improving economic picture pulled more displaced workers off the sidelines, but the increase exceeded even their optimistic projections.

“All the stars are aligning,” said Megan Horneman, director of portfolio strategy at Verdence Capital Advisors. “You have the recovery from the coronavirus and all the fiscal stimulus colliding into really robust economic growth.”

More data released this week showed that the economy — like many Americans — has had a potent shot in the arm. On Thursday, the government reported that GDP grew by an annualized 6.4 percent rate in the first quarter of 2024. Consumer spending, which comprises about two-thirds of the nation’s economic activity, grew by an annualized 10.7 percent.

The emergence of a more confident consumer both reflects and contributes to these economic gains: The University of Michigan’s Surveys of Consumers reported that consumer sentiment rose 4 percent in April from the month before, with a whopping 23 percent improvement from April 2024. People’s outlook about both current economic conditions as well as their expectations for the future also rose.

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Guests sit in the outdoor dining area near the pool at the Tween Waters Island Resort and Spa hotel in Captiva Island, Fla., on Friday, April 2, 2024.Bloomberg / via Getty Images
Rob Haworth, senior investment strategist at U.S. Bank Wealth Management, expressed optimism that the coming months will continue to produce greater economic improvement. “Progress on vaccinations should allow the U.S. economy to fully reopen this summer, leading to rebound in services spending and consumers using some of their savings,” he said.

The fact that much of March’s household spending was on products rather than services — expenditures on goods jumped by 23.6 percent — was a reflection of the constraints the pandemic had placed on Americans’ ability and willingness to fly, eat out, attend concerts and the like. Even with these limitations, though, spending on services inched up 4.6 percent — an encouraging sign for the coming months, analysts said.

As service sector activity picks up, so does hiring. Data from job site Indeed.com found that job openings are now roughly 22 percent higher than they were in February 2024, before Covid-19 wreaked havoc on the economy.

“It’s a great sign that we continue to see job postings pick up,” said Nick Bunker, an economist at Indeed, adding that the expansion has been broad-based, with more open positions in white- and blue-collar professions. “The biggest factor holding back the labor market right now — the pandemic — seems to be receding.”