Real Disposable Income in Decline

By at 28 October, 2023, 11:55 am

by Raymond J. Keating – 

When the U.S. Bureau of Economic Analysis (BEA) personal income report comes out each month, the income measure that matters most to individuals, families, businesses and the economy either doesn’t get mentioned at all in news accounts, or it comes in as an after-thought.

But make no mistake, real disposable personal income – that is, personal income after current taxes and adjusted for inflation – is the income that people have available to use for consuming, investing or saving.

The latest BEA personal income report estimates that real disposable income not only declined in September 2023 (-0.1 percent), but has declined in three straight months (-0.1 percent in August and -0.2 percent in July), and was flat in June. (For good measure, personal income was down in September, and effectively flat in each of the three previous months once inflation is factored in.)

Looking at the recent trend (see the following chart), once clear of pandemic effects, real per capita disposable income in September registered $49,904 (in 2017 dollars), and that was up very slightly from two years ago ($49,803) and from pre-pandemic February 2020 ($48,014).

Source: Federal Reserve Bank of St. Louis, FRED

The lack of substantive growth in real disposable income not only is a result of the U.S. slow-growth economy that has been experienced since the Great Recession, but it also is a cause of that slowdown.

Real disposable income perhaps shows most clearly how high taxes and inflation have a very real and negative effect on individuals, families, businesses and our economy.

Raymond J. Keating is chief economist for the Small Business & Entrepreneurship Council. His latest books on the economy are The Weekly Economist: 52 Quick Reads to Help You Think Like an Economist and The Weekly Economist II: 52 More Quick Reads to Help You Think Like an Economist.


News and Media Releases