While personal income fell briefly for a month in March 2020, overall income was elevated throughout the pandemic due to government support such as stimulus checks and expanded unemployment insurance. Employment income took longer to return to pre-pandemic levels, only reaching February 2020 levels in November 2020.
In the five years preceding 2020, personal income grew an average of 4.3% from year to year. From 2019 to 2021, personal income increased by 14.5%. Personal income increased with monthly averages of 0.46% in 2020, 1% in 2021, and 0.45% in 2022 so far.
Household spending did not rise with work income, despite several stimulus checks sent to Americans. Instead, many households saved the additional income rather than spend it. While overall income returned to pre-pandemic levels as soon as April 2020, household spending levels only returned to pre-pandemic levels in March 2021, after over a year of depressed spending. In May 2022, household spending increased 4.4% from January 2020.
Most spending has returned to pre-pandemic levels but not all. In May 2022, spending on transportation was about 3% below January 2020 levels. Spending on education was also 1.2% below pre-pandemic levels. Spending on travel abroad increased the most of any category from January 2020 to May 2022, followed by apparel. Spending almost doubled on travel abroad, while it increased 17% for apparel.
In May 2022, Americans were saving 5.4% of their disposable income.
In 2019, Americans saved an average of 7.6% of their after-tax income each month. The saving rate averaged 13% since the pandemic began in March 2020 to May 2022, with spikes in savings in the months with elevated government income due to stimulus checks or unemployment insurance. In September 2021, the saving rate reached February 2020 pre-pandemic levels.
This higher saving rate is true only for America in aggregate; it does not speak to the experiences of individual American families. According to the Census Household Pulse Survey, as of July 11, 2 in 5 adults lived in households where it has been somewhat or very difficult to pay for usual household expenses.