US fiscal stimulus helped boost spending in low-income areas early in the pandemic
Consumption in low-income communities fell by a smaller amount and recovered faster than in middle- and high-income ZIP codes during the pandemic. While the initial economic shock of the coronavirus was regressive, hitting low-income communities the hardest, consumption in low-income ZIP codes has since returned to pre-pandemic levels, supported by a progressive fiscal response.
The fiscal response to the coronavirus pandemic provided substantial support to individuals, including many with lower incomes, through expanded unemployment insurance payments and stimulus checks to taxpayers earning less than $99,000 ($198,000 for married couples) a year. Among the very lowest earners, these stimulus measures more than offset lost income, substantially increasing household disposable income and helping to bolster consumer spending in low-income communities.
However, the expanded unemployment insurance payments stopped at the end of July. Without the added demand associated with expanded unemployment insurance benefits, the economic recovery will likely slow, increasing strain on low-income communities.
This PIIE Chart was adapted from Jason Furman’s presentation at the “Global economic prospects: Fall 2020” event held at the Peterson Institute for International Economics.