Solid Personal Income Report for May

By at 28 June, 2024, 12:28 pm

by Raymond J. Keating –

By definition, a mixed or questionable economy, like the one we’ve been stuck in, is going to serve up some good news and some bad news in assorted data. The latest personal income report from the U.S. Bureau of Economic Analysis falls into the “good news” category.

First, as was reflected in the latest Consumer Price Index data, the PCE (personal consumption expenditures) Index in this report pointed to 0 percent inflation in May.

Second, personal income grew at a solid 0.5 percent for the month, and that nominal change isn’t pared back due to inflation.

Third, real disposable income (i.e., personal income less personal current taxes adjusted for inflation) also grew by a strong 0.5 percent. As noted in the chart below, real per capita disposable income – after the pandemic anomalies – had resumed growth from mid-2022 to mid-2023, but subsequently was stagnant through April 2024.

Source: Federal Reserve Bank of St. Louis, FRED

Real disposable income is critical because this is the income from which people spend, invest and save. Hopefully, the growth experienced in May will become a trend, but that will, in part, require a continued taming of inflation. Indeed, inflation is a tax.

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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