U.S. Personal Income GainsMinimally As Spending Recovers

Negative job growth continued to minimize personal income growth last month. Personal income gained 0.2% during October after an upwardly revised like increase in September. The latest figure matched Consensus expectations. While the gains have been small, they are improved from early this year due to easier declines in employment which have been accompanied by higher gov't transfer payments.

Wages & salaries were unchanged last month after a revised 0.1% September increase. Year-to-year wages fell 3.6% following a 2.1% increase during 2008. Wages in the factory sector fell 0.5% (-11.2% y/y) after a minimal September decline. In the service sector wages rose just 0.1% (-2.6% y/y), but continuing to offset some of this weakness has been the government sector where wages rose 2.7% y/y.

Growth in unemployment insurance payments has slowed recently. They increased just 0.1% last month after a 10.4% 3Q increase and a 27.4% 2Q gain. Interest income rose 0.5% (-5.6% y/y) as the decline in rates found a bottom while dividend income fell by 0.2% (-21.2% y/y).

Disposable personal income rose an improved 0.4% due to lower tax payments. Adjusted for inflation real disposable income rose 0.2% after a 0.4% 3Q decline. The saving rate slipped modestly to 4.6% from an upwardly revised 4.6% during September. The rate remained up from last year and more than double the 2007 level due to reduced spending.

Personal spending gained 0.3% as durables spending increased 0.2% (0.1% y/y). Spending on motor vehicles recovered 8.6% (3.5% y/y) after the September drop. That increase was offset by a 0.6% (-4.0% y/y) decline in spending on furniture & appliances. Spending on nondurables increased 0.4% (-1.4% y/y) as outlays on apparel rose for the fourth straight month (0.5% y/y) . Outlays on gasoline rose 0.7% with higher prices but were down 17.9% from one year ago. Outlays on services increased 0.5% (1.8% y/y) as spending on health care continued quite strong posting a 5.6% gain versus last year.

The PCE chain price index increased 0.3% during October lifted by a firm 2.1% increase in gasoline costs. Less food-and-energy, "core" prices were again soft and posted just a 0.2% increase. Prices for durable goods rose just 0.1% as home furnishing prices fell (-1.9% y/y) while prices for services gained a steady 1.2% y/y.

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

The job market continued to improve last week. The Labor Department reported that initial claims for unemployment insurance fell to 466,000 from a downwardly revised 501,000 during the prior week. The latest level was the lowest since early-September of last year and are down  sharply from the peak reached in March of 674,000 claims. The four-week moving average of claims fell to 497,000 and the latest weekly figure was lower than Consensus expectations for 500,000 claims.

Continuing claims for unemployment insurance during the latest week fell 109,000 to their lowest level since late February. The decline reflects the improved job market but may also be a function of the exhaustion of benefits. Continuing claims provide an indication of workers' ability to find employment. The four-week average of continuing claims fell modestly to 5,614,750. This series dates back to 1966.

Extended benefits for unemployment insurance rose fell modestly w/w and averaged 539,531 in early-November versus 550,343 during October.

The insured rate of unemployment fell to 4.1% and matched its lowest since late-March. The rate reached a high of 5.2% during late-June. During the last ten years, there has been a 93% correlation between the level of the insured unemployment rate and the overall rate of unemployment published by the Bureau of Labor Statistics.

he highest insured unemployment rates in the week ending November 7 were in Puerto Rico (6.2%), Oregon (5.5), Nevada (5.1), Alaska (5.1), Wisconsin (4.9), Pennsylvania (4.9), California (4.7), Michigan (4.6), and South Carolina (4.4). The lowest insured unemployment rates were in North Dakota (1.1%), Virginia (1.9), Texas (2.5), Maine (2.7), Wyoming (2.8), Ohio (3.2), Maryland (2.8), New York (3.5), Mississippi (3.5) and Florida (3.7).

The unemployment insurance claims data is available in Haver's WEEKLY database and the state data is in the REGIONW database.

The minutes to the latest FOMC meeting can be found here.