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Economy in Brief

U.S. Personal Income Remains Weak
by Tom Moeller March 1, 2010

Overall personal income ticked up just 0.1% in January following downwardly revised increases during the prior two months. The latest weak increase disappointed Consensus expectations for a 0.4% rise. 

Declines spread through much of the income spectrum. The weak housing market pulled proprietors' income down 0.3% (+1.6% y/y) and rental income fell 0.3%, the first decline since 2007. Lower interest rates caused interest income also to fall 0.3% though the y/y change of -2.7% was improved from the worst of  last September (-8.2% y/y). Dividend income fell 3.0% (-13.3% y/y) though that y/y change was half its worst. Finally, the improved job market and the expiration of long-term benefits caused a 2.2% decline in unemployment insurance payments, the fourth consecutive monthly decline (+36.6% y/y).  

To the upside, wages & salaries improved 0.4% after an unrevised 0.1% December increase. Year-to-year growth was still a negative 1.0% but improved from -4.9% during last summer. Wages in the factory sector rose 0.8% but still remained 5.8% lower than last year. In the private service sector wages rose 0.3% following a downwardly revised 0.1% December reading. Government sector wages did increase 0.5% but weak hiring cut the y/y increase to 2.4%, its lowest since early 1994. 

Disposable income fell 0.4% and reversed the prior month's increase as tax payments jumped 5.5%. The income decline caused the savings rate to decline to 3.3%, its lowest since late-2008. The rate still was up, however, from the 1.0% low at the beginning of the last recession.

Personal spending rose 0.5% last month following little-revised increases of 0.3%-to-0.5% during the prior three periods. A 7.0% m/m rise in spending on gasoline (41.5% y/y) led the increase as prices spiked, but the real gain was just 2.1% (0.8% y/y). Nominal apparel spending gained 0.6% (1.6% y/y) while outlays on services rose a weakened 0.2% (2.1% y/y). To the downside, spending on motor vehicles & parts fell 1.2% (+5.6% y/y) and  spending on home furnishings fell for the third month in the last four (-0.4% y/y). 

The PCE chain price index ticked up just 0.2% during January and 2.1% y/y with higher gasoline prices. The core PCE price deflator was unchanged during January and that reflected weakness throughout the categories.

The personal income & consumption figures are available in Haver's USECON and USNA databases. 

Disposition of Personal Income (%)  January December November Y/Y 2009 2008 2007
Personal Income 0.1 0.3 0.4 1.1 -1.7 2.9 5.6
   Disposable Personal Income -0.4 0.4 0.5 2.1 1.1 3.9 4.9
Personal Consumption Expenditures 0.5 0.3 0.5 3.5 -0.4 3.1 5.4
Saving Rate 3.3 4.2 4.1 4.4 (Jan.'09) 4.3 2.6 1.7
PCE Chain Price Index 0.2 0.1 0.2 2.1 0.2 3.3 2.7
   Less food & energy 0.0 0.1 0.1 1.4 1.5 2.4 2.4
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