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COVID-19 uncovers surprising economic trend

The pandemic has left some people better off financially.

Julius Probst, PhD
January 25, 2021

Economic downturns typically hurt people in the wallet. But the COVID-19 pandemic continues to show up some surprising trends.

In the US, for example, disposable incomes continued to climb in 2020 amid the biggest slowdown since the Great Depression in the 1930s. As our chart shows, household income surged by 10% in the second quarter even as nominal GDP dropped a record 9%.

Government stimulus checks, higher unemployment benefits and other policy measures to support people through the pandemic certainly played a role. So too the lockdowns that kept people at home instead of out spending.

As the Biden administration prepares to distribute a third wave of direct relief payments, could the additional income lead to pent-up demand and drive up the risk of inflation when the pandemic ends?

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