A Mixed Story in the Latest Personal Income Report

By at 1 March, 2024, 9:43 am

by Raymond J. Keating –

The latest personal income report from the U.S. Bureau of Economic Analysis served up a mixed story.

First, the report’s measure of inflation – i.e., personal consumption expenditures (PCE) index – was unwelcome. The PCE inflation increased by 0.3 percent in January, after three very quiet months (i.e., flat in October and November, and only 0.1 percent in December). Of course, one month’s data is just that – one month. But, of course, inflation continues to warrant close watching given what’s occurred over the past three-plus years.

Second, the topline increase in personal income was a strong 1.0 percent in current dollars. So, even after inflation is factored in, that’s still a solid gain.

Third, however, real disposable personal income (or personal income less personal current taxes) was flat. And if we look at per capita real disposable income – which is the most important measure of income as these are the inflation-adjusted earnings from which individuals invest, save and consume – it turns out that we saw a decline in January. As noted in the following chart, real per capita disposable income growth grew by only 5 percent since the pre-pandemic February 2020 level.


Source: Federal Reserve Bank of St. Louis, FRED

Finally, personal consumption expenditures adjusted for inflation actually declined by 0.1 percent in January 2024. That lined up with what we saw in the latest retail sales report.

In the end, the January personal income report adds some additional uncertainty to the economic mix at the start of a year that might be dominated by uncertainty on a variety of fronts. As noted in our review of recent data that contribute to such uncertainty are waning consumer confidence, the slide in January sales and related business investment and production indicators that are less than positive to being the year.

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, The Weekly Economist II: 52 More Quick Reads to Help You Think Like an Economist and The Weekly Economist III: Another 52 Quick Reads to Help You Think Like an Economist.


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