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Economy in Brief

Personal Income Boosted By Jobless Insurance Payouts
by Tom Moeller   October 1, 2010

Personal income firmed during August and posted a 0.5% gain following an unrevised 0.2% July increase. The increase beat Consensus expectations for a 0.3% gain.However, rather than reflecting some broad-based improvement in earnings, it was mostly limited to those receiving unemployment benefits. These surged 21.9% m/m (-2.5% y/y) due to the latest extension of jobless insurance payouts.Continuing modest were wages & salaries which rose 0.3% (1.9% y/y) after a 0.4% July gain. Much of last month's moderation was due to a 0.4% decline (+1.1% y/y) in government sector wages. Disposable income rose the same 0.5% as overall income.Adjusted for price inflation, take-home pay rose 0.2% (1.7% y/y).

Personal consumption expenditures rose 0.4%, the same as during July; and on a three-month basis, spending growth improved to 3.1%(AR).A 0.3% August spending increase had been expected.Regrettably, most of the pickup reflects higher gasoline prices.Adjusted for inflation, spending rose just 0.2% during each of the last two months and at a stable 1.8% rate during the last three.Since May, real services spending rose at a 1.3% rate.For goods, real spending growth picked up to 2.7% owing to a 10.3% rise in recreation.

Moderate gains in income coupled with moderate spending can mean only one thing for savings -- stability.The personal savings rate ticked up to 5.8% from a downwardly revised 5.7% in July.The latest roughly equals the level for all of last year though it does remain up from the 1.8% low during the fall of 2007.

The PCE chain price index again rose a moderate 0.2% during August.These increases followed three months of decline. A 3.6% increase (5.2% y/y) in gasoline prices roughly equaled the July gain. Food & beverage prices ticked up 0.1%(0.7% y/y) but that's up from declines early this year.The core PCE price deflator ticked up just 0.1% for the fourth consecutive month and y/y growth of 1.4% was nearly its weakest since the 1960s.

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

Yesterday's speech by Fed Chairman Ben S.Bernanke can be found here

Disposition of Personal Income (%) August July June Y/Y 2009 2008 2007
Personal Income 0.5 0.2 0.0 3.3 -1.7 4.0 5.7
  Wages & Salaries 0.3 0.4 -0.1 1.9 -4.3 2.1 5.8
Disposable Personal Income 0.5 0.1 0.0 3.2 0.7 5.1 5.1
Personal Consumption Expenditures 0.4 0.4 -0.0 2.7 -1.0 3.0 5.2
Saving Rate 5.8 5.7 6.0 5.1 (Aug. '09) 5.9 4.1 2.1
PCE Chain Price Index 0.2 0.2 -0.1 1.5 0.2 3.3 2.7
   Less food & energy 0.1 0.1 0.1 1.4 1.5 2.3 2.4
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