U.S. Income Surges But Spending Slows

Personal income jumped 2.6% (6.9% y/y) last month after a revised 1.0% November gain, initially reported as 0.6%. A 0.8% rise was the consensus expectation. Last month's jump centered on a 34.3% surge (49.6% y/y) in dividend income. For all of 2012, total personal income growth decelerated to 3.5% from 5.1% in 2011. Income other than from dividends was solid last month. Wage & salary earnings rose a firm 0.6% (4.6% y/y) following an upwardly revised 0.9% November jump. Interest income surged 1.9% (2.7% y/y) and proprietors' income rose 0.8% (5.8% y/y. To the moderate side, transfer receipts increased 0.4% (3.5% y/y) while rental incomes rose 0.4% (12.5% y/y) as well. 

Despite the surge in income, consumers raised spending by just 0.2% (3.6% y/y). That followed an unrevised 0.4% November rise and compared to expectations for a 0.3% gain. Leading last month's spending was a 2.2% rise (11.8% y/y) in motor vehicle purchases and a 0.9% gain (4.4% y/y) in home furnishings & appliances. Services spending increased a modest 0.2% (3.2% y/y) but purchases of nondurables fell 0.2% (+2.7% y/y). That decline was led by lessened outlays for gasoline, off 4.0% (+0.9% y/y) due to lower prices. Spending on clothing rose 0.7% (4.2% y/y).

With the jump in income and the modest gain in spending, the personal savings rate surged to 6.5%, its highest level since May of 2009. That's up from 3.9% for all of 2012.

The PCE chain price index dipped slightly (+1.3% y/y) with a 2.1% decline (+1.8% y/y) in gasoline prices, the third consecutive monthly fall. Prices excluding food and energy also were unchanged (1.4% y/y) for the second consecutive month. Motor vehicle costs were unchanged (0.6% y/y); furniture prices fell 0.3% (-0.5% y/y) and clothing prices dropped 0.2% (+1.9% y/y). Services prices ticked up 0.1% (1.9% y/y). 

Adjusted for price changes, disposable income gained 2.8% (2.5% y/y) and real spending rose 0.2% (2.2% y/y) during December.

The personal income & consumption figures are available in Haver's USECON and USNA databases. The consensus expectations figures are in the AS1REPNA database.

Initial claims for unemployment insurance rose to 368,000 (-3.4% y/y) during the week ended January 26 versus an unrevised 330,000 a week earlier. Consensus expectations were for 350,000 claims. The four week moving average of claims ticked up to 352,000 but remained near the low for the economic recovery. During the last ten years, there has been a 75% correlation between the level of claims and the m/m change in nonfarm payrolls.

Continuing claims for unemployment insurance in the week ended January 19 rose to 3.197M (-8.3% y/y). The insured rate of unemployment held at 2.5%, near the lowest level since July 2008. This particular count covers only "regular" programs and does not include all extended benefit and other specialized jobless insurance programs. In the week of January 12, the latest figure available, the grand total of all benefit recipients rose to 5.915M, down 22.7% from a year ago. That compares to a cycle peak of 12.060M in January 2010.

By state, the insured unemployment rate continued to vary greatly with Virginia (1.56%), Florida (1.69%) Texas (1.70%), North Dakota (1.83%), Tennessee (2.09%), Indiana (2.32%) and Ohio (2.53%) at the low end of the range. At the high end were New York (3.38%), Michigan (3.55%), California (3.55%), Massachusetts (3.69%), Illinois (3.95%), New Jersey (4.24%) and Pennsylvania (4.45%).

Data on weekly unemployment insurance are contained in Haver's WEEKLY database and they are summarized monthly in USECON. Data for individual states are in REGIONW. The consensus estimates come from the Action Economics survey, carried in the AS1REPNA database.

The employment cost index for private industry workers rose 0.5% in Q4'12 versus an unrevised 0.4% Q3 rise. The latest increase in total compensation matched expectations as compiled by Bloomberg. The full-year rise of 1.9% was down from the 2012 increase of 2.2%.

The increase in private sector wages & salaries slipped to 0.3% (1.7% y/y). Amongst industry groups, wages in the financial industry rose 1.9% over the last four quarters, education & health services industries rose 1.7% y/y while professional & business services wages rose 2.0% y/y. Wages in leisure & hospitality industries rose an improved 1.1% y/y). State & local government workers saw a 1.1% rise in wages last year.

Benefit cost increases continued moderate and they rose 0.6% (2.0% y/y. Benefits amongst goods-producing workers rose 1.4% y/y but for service-producing industry workers they rose a lessened 2.6% y/y. State & local government sector workers realized an improved 3.4% four-quarter rise in benefits.

The employment cost index figures are available in Haver's USECON database.