Latest Personal Income Data: Welcome News for the Month

By at 1 December, 2022, 6:35 pm

by Raymond J. Keating –

As we’ve experienced since the start of the Great Recession at the end of 2007 (that’s right – for 15 years now!), during tough and/or sluggish economic times, the near-constant feed of information coming forth on the economy turns out to be inconsistent or uneven. There are a few positives here, a bunch of negatives there, and so on.

In the fairly positive column goes the October personal income report from the U.S. Bureau of Economic Analysis.

Personal income growth came in at 0.7 percent, which outdistanced the report’s inflation measure, the PCE (personal consumption expenditures) index, which registered 0.3 percent.

Real personal consumption expenditures also grew at 0.5 percent.

And real disposable income (i.e., personal income less personal current taxes and adjusted for inflation) grew by 0.4 percent. And looking at real per capita disposable income – arguably the most import item in this report given that disposable income is what individuals use to consume, save and invest – it was up in October. That came after a decline in September.

But as noted in the following chart, depending on how far one wishes to look back given post-pandemic measures, the trend either has been down or stagnation on the real per capita disposable income front. That’s deeply troubling.

Source: Federal Reserve Bank of St. Louis, FRED

So, a positive month’s data is most welcome.

However, one month does not make a trend. And we need to see continued declines in the rate of inflation, and stronger growth in real per capita disposable income. That will require a shift in policymaking away from punishing entrepreneurship, business, investment and work via increased tax and regulatory burdens, for example, and turning policymaking toward broad, substantive and permanent tax and regulatory relief.

Raymond J. Keating is chief economist for the Small Business & Entrepreneurship Council. His latest book is The Weekly Economist: 52 Quick Reads to Help You Think Like an Economist.


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