More Good News: Strong Growth in Personal Income

By at 1 December, 2018, 9:10 am

Small Business Insider

by Raymond J. Keating

The latest report on personal income from the U.S. Bureau of Economic Analysis was rich in good news. Personal income grew by 0.5 percent in October, and disposable personal income (i.e., personal income less current taxes) increased by 0.3 percent.

It was noted that a good chunk of personal income growth came from wages and salaries, and from proprietors’ income – positive news for workers and small business owners.

And if we zero in on arguably the most important economic indicator in the report, real per capita disposable personal income – from which individuals and families invest, save and consume – grew by 0.3 percent.

The Trend is Positive

As noted in the chart below, real per capita disposable income has been on a solid growth path since the middle of 2016, with only one month of negative growth since July of 2017.

Source: Federal Bank of St. Louis, FRED

Tax and regulatory relief – by enhancing the returns on and incentivizing risk taking – has made a real difference in terms of business investment and income growth.

That agenda needs to be further advanced and expanded at the federal, state and local policy levels, while avoiding temptations, for example, to further accelerate government spending and/or persist with a destructive, costly trade policy agenda focused on increased tariffs. Reducing governmental costs and obstacles always makes for sound policymaking when it comes to advancing free enterprise.


Raymond J. Keating is chief economist for the Small Business & Entrepreneurship Council.

Keating’s latest book published by SBE Council is titled Unleashing Small Business Through IP:  The Role of Intellectual Property in Driving Entrepreneurship, Innovation and Investment and it is available free on SBE Council’s website here.


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