Income declines for first time in two years in August

posted at 1:25 pm on September 30, 2011 by Ed Morrissey

Despite the high level of unemployment, wages have grown at a slow rate over the past two years — or at least they did.  The Bureau of Economic Analysis reported this morning that personal income dropped in August for the first time since October 2009 — and spending flattened to the rate of inflation:

Personal income decreased $7.3 billion, or 0.1 percent, and disposable personal income (DPI)  decreased $5.0 billion, or less than 0.1 percent, in August, according to the Bureau of Economic  Analysis.  Personal consumption expenditures (PCE) increased $22.7 billion, or 0.2 percent.  In July,  personal income increased $17.1 billion, or 0.1 percent, DPI increased $14.4 billion, or 0.1 percent,  and PCE increased $76.6 billion, or 0.7 percent, based on revised estimates.

This is actually the second month in a row that real disposable personal income has dropped in chained 2005 dollars.  After showing a 0.3% increase in June (preceded by two months of 0.0% stagnation), RDPI declined by 0.2% in July, and now 0.3% in August.  The stagnant 0.0% in real PCE shown in the statement is actually a decline of less than 0.1%, the report states, the second decline in three months and the third decline in the last five.  Consumers see their pocketbooks getting hit as businesses tighten compensation and are spending less as a result.

That’s the same conclusion reached by Reuters, which surprisingly expresses little surprise over the report:

Incomes fell for the first time in nearly two years in August and consumers dug into their savings to keep spending, according to a government report that showed the impact of the weak jobs market.

The Commerce Department said on Friday spending rose 0.2 percent, in line with economists’ expectations, after increasing 0.7 percent in July. When adjusted for inflation, however, spending was unchanged after rising 0.4 percent in July. …

Income slipped 0.1 percent, the first decline since October 2009, with private wages and salaries dropping $12.2 billion after increasing $23.8 billion in July.

Economists had expected income to edge up 0.1 percent.

“What you’re basically getting is a scene where consumers are losing momentum, they’re losing momentum on income and as a result of that they’re slowing down on spending,” said Steven Ricchiuto, U.S. chief economist at Mizuho Securities in New York.

Part of the bad news in the report is that consumer spending on goods dropped 0.2%, balanced by a 0.1% increase in services.  Inflation calmed a bit in August, dropping to 0.2% after July’s 0.4% in the broader PCE index and also being cut in half in the core PCE index at 0.1% from 0.2% (excludes food and energy costs).

What does this mean?  It explains the zero jobs growth figure for August, for one thing, which is why it didn’t come as a great surprise to anyone.  Despite yesterday’s strange drop in weekly initial jobless claims, we can probably expect another disappointing monthly employment report next Friday.  Consumers won’t spend if their income is getting squeezed, and businesses won’t expand if demand falls.  It’s a recipe for continued stagnation at best, and as we close out the third quarter, it’s an indication that the economy is continuing to move in the wrong direction.

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Unexpectedly!

Washington Nearsider on September 30, 2011 at 1:26 PM

Double dip.

Vashta.Nerada on September 30, 2011 at 1:27 PM

That governor christie sure is fat, isn’t he?

lorien1973 on September 30, 2011 at 1:27 PM

Expand the WIC program to spur spending…this should such a no-brainer. WIC and unemployment benefits are one of the biggest job producers in our economy.

WashJeff on September 30, 2011 at 1:29 PM

That governor christie sure is fat, isn’t he?

lorien1973 on September 30, 2011 at 1:27 PM

Thank God you were here to get us back on topic.

Washington Nearsider on September 30, 2011 at 1:29 PM

So, what, exactly, would a depression look like? As different from this, I mean? I certainly don’t think it’s continual months of contraction… the US didn’t shrink from 1929 to 1939 without a break, I’m sure.

Vanceone on September 30, 2011 at 1:30 PM

Palin. Really dodged a bullet there, didn’t we? Whew!

lorien1973 on September 30, 2011 at 1:30 PM

Double dip.

Vashta.Nerada on September 30, 2011 at 1:27 PM

..yassssah! Jes sittin’ over heah on th’ side o’ th’ road, wif my bedroom slippers on, sippin’ on mah Slurpee.

;-)

The War Planner on September 30, 2011 at 1:31 PM

the US didn’t shrink from 1929 to 1939 without a break, I’m sure.

There was no depression till the government tried to prevent one.

lorien1973 on September 30, 2011 at 1:31 PM

Did I mention I killed Osama Bin Laden and Anwar al-Awlaki?

WashJeff on September 30, 2011 at 1:32 PM

“Thank you President Obama.”

-crr6

Chuck Schick on September 30, 2011 at 1:33 PM

But we got rid of DADT, you racists!

faraway on September 30, 2011 at 1:34 PM

That Perry is a real foreign policy genius, isn’t he?

lorien1973 on September 30, 2011 at 1:35 PM

Hey look over there… Christie is fat…

sandee on September 30, 2011 at 1:37 PM

Just you wait until the x-mas retail sales numbers come out.
I,m thinking it will be a blood bath as families by the million do Pollyanna instead of buying multi-gifts.

Hey I was gonna by you an x-box but here is a fruit cake I made for ya.

I think 2012 will be the year we watch buttloads of retailers go broke or really scale back.

esnap on September 30, 2011 at 1:37 PM

So, what, exactly, would a depression look like? As different from this, I mean? I certainly don’t think it’s continual months of contraction… the US didn’t shrink from 1929 to 1939 without a break, I’m sure.

Vanceone on September 30, 2011 at 1:30 PM

Yeah, the Depression was a double dip recession with anemic government-driven growth from 1933-1937, then the other shoe dropped. Sounds kinda familiar.

forest on September 30, 2011 at 1:38 PM

That Cain sure is an uncle tom, isn’t he?

lorien1973 on September 30, 2011 at 1:39 PM

Income declines for first time in two years in August

This is what spreading the wealth around looks like. And just what sort of story were we expecting after the wealth-spreading began?

“Poor people closing the gap on the middle class through hardwork and ingenuity”?

BobMbx on September 30, 2011 at 1:39 PM

So, what, exactly, would a depression look like?

No I-phone service?

BobMbx on September 30, 2011 at 1:40 PM

Just more of the unintended consequences of Obamanomics.

GarandFan on September 30, 2011 at 1:41 PM

Sell more guns to Mexican narco-terrorists, that would create jobs in the U.S. firearm and ammo industries through increased demand.

I amaze myself sometimes with my economic acumen.

Bishop on September 30, 2011 at 1:42 PM

I went to see a movie (Moneyball) last night… 7 people in the theater…

Khun Joe on September 30, 2011 at 1:43 PM

…including my son and me…

Khun Joe on September 30, 2011 at 1:43 PM

Sell more guns to Mexican narco-terrorists, that would create jobs in the U.S. firearm and ammo industries through increased demand.

I amaze myself sometimes with my economic acumen.

Bishop on September 30, 2011 at 1:42 PM

Not to mention the emergency services and undertaking field.

Chip on September 30, 2011 at 1:45 PM

(sigh)

Tim_CA on September 30, 2011 at 1:45 PM

Consumers won’t spend if their income is getting squeezed, and businesses won’t expand if demand falls. It’s a recipe for continued stagnation at best, and as we close out the third quarter, it’s an indication that the economy is continuing to move in the wrong direction.

This comes as no surprise. Analysis by the CBO and similar models designed by Wall Street analysts pegged negative economic growth for 2009 and early 2010 if not for the effects of federal stimulus. As the stimulus dollars wind down, there’s no reason to expect anything other than economic contraction.

This is what spreading the wealth around looks like. And just what sort of story were we expecting after the wealth-spreading began?

Please show us how the wealth was “spread around”. It’s a popular right wing talking point and delusion that has no basis in fact. Under Obama, taxes on the wealthiest have remained at record lows while the upper class has continued to prosper while middle class families have suffered.

http://www.businessinsider.com/gundlach-presentation-dollars-cents-2011-9#-25

T

bayam on September 30, 2011 at 1:45 PM

Deflation

jp on September 30, 2011 at 1:50 PM

In my state things are going well. My spouse just got a $2 per hour raise and stands to get another $2 when the hospital raises the wages of the minimum wage earners.

csdeven on September 30, 2011 at 1:52 PM

So, what, exactly, would a depression look like? As different from this, I mean? I certainly don’t think it’s continual months of contraction… the US didn’t shrink from 1929 to 1939 without a break, I’m sure.

Vanceone on September 30, 2011 at 1:30 PM

If the unemployment rate were calculated today the same way it was calculated in the 30s, we’d be at about 17%-20%. At the peak of the Great Depression it got to 25% and averaged about 15% for the decade.

We are in a depression.

angryed on September 30, 2011 at 1:55 PM

It’s so bad that even the first lady is reduced to doing her own shopping, and at Target no less!

We may just have to give failing solar panel companies a few more billions.

rbj on September 30, 2011 at 1:56 PM

This is a feature, not a bug, of socialism (also known as 0bamanomics).

UltimateBob on September 30, 2011 at 1:58 PM

As the stimulus dollars wind down, there’s no reason to expect anything other than economic contraction.

Which is coming on the heels of record-breaking economic expansion, including keeping the unemployment rate below 8.8%, just as promised.

One question though: The 10 million stimulus dollars spent on the “Fast and Furious” scheme, how exactly was that….*scratches head*…how was that supposed to create jobs? I mean other than Mexican funeral homes hiring extra staff to keep up with the demand.

Bishop on September 30, 2011 at 1:59 PM

It’s so bad that even the first lady is reduced to doing her own shopping, and at Target no less!

Its pronounced “Tar-zhay”.

But then again, why is the First Ladle shopping at a store that obviously promotes violence? With all those bulls-eye symbols around…….

BobMbx on September 30, 2011 at 1:59 PM

Booossh!

rebuzz on September 30, 2011 at 2:03 PM

At some point, you’ve made enough money.

faraway on September 30, 2011 at 2:03 PM

http://www.businessinsider.com/gundlach-presentation-dollars-cents-2011-9#-25

T

bayam on September 30, 2011 at 1:45 PM

And the relevance of the price of gold over time to the thread is…. what? Or should I read the whole presentation?

BobMbx on September 30, 2011 at 2:03 PM

bayam on September 30, 2011 at 1:45 PM

Ah yes, you make the accusation of a ‘right wing talking point ‘ and throw out your own that narrowly looks at the facts to tries mightily, but fails to prove a falsehood.

You do realize that the incomes of people at the higher echelons are much more vulnerable to economic fluctuations than those at the lower echelons – those of the 47 % who don’t pay any income taxes.

But really, are you actually going to try and disprove the obvious?

That there isn’t a whole lot of spreading the wealth around?

That those that pay most of the income taxes aren’t if fact subsidizing those who pay nothing?

Are you really trying to make that argument?

Chip on September 30, 2011 at 2:03 PM

I went to see a movie (Moneyball) last night… 7 people in the theater…

Khun Joe on September 30, 2011 at 1:43 PM

Well, if there was one class of people who need to feel the pain that the average American is feeling, it’s the out-of-touch idiots in the entertainment industry.

Maybe this will be a wake-up call for them to begin really thinking about the effects of the socialist policies they support.

UltimateBob on September 30, 2011 at 2:03 PM

Moochy always shops at Target. Well ok she hasn’t been there in at least 10 years (that’s why Gaia invented maids and personal assistants), but she really needed cleaning supplies.

Bishop on September 30, 2011 at 2:06 PM

First Ladle ??!!??

you owe me a clean keyboard.! :^)

orbitalair on September 30, 2011 at 2:08 PM

One other thing about the 1930s…

Several of the biggest gains in stocks came in the 30s. Stocks actually did quite well during the depression after the initial crash. Dow Jones gained 300% between 1932 and 1937. Dow is up about 100% now from its early 2009 lows. Very similar charts comparing 2009-2011 with 1931-1935. Big fall, then big shot up, then wild ups and downs from there.

And we’re seeing the same thing now. Wild swings day to day, week to week with some outrageous days of 3-5% losses followed by 3-5% gains.

angryed on September 30, 2011 at 2:10 PM

Consumers won’t spend if their income is getting squeezed, and businesses won’t expand if demand falls. 

That statement comes perilously close to the “wage price spiral” Keyensian fallacy that pushed policy makers into turning the crash of ’29 into the Great Depression. Wages have to go down so that the market can reach equilibrium. Until that happens, our economy is just going to spin it’s wheels.

Count to 10 on September 30, 2011 at 2:12 PM

Here is Bayam again on her knees falating “experts”. The same experts that have been 100% wrong on everything for the pasts 5 years.

The same experts that said housing would never go down.

The same experts that said with porkulus, unemployment would stay below 8%

The same experts (Krugman) who predicted a recession in 2003, 2004, 2005, 2006…recessions that never happened.

The same experts that said the govt would make money with GM’s bailout, only to see the govt lose $18B.

angryed on September 30, 2011 at 2:12 PM

This is depressing. I dread Christmas this year. Things are tight. I just wonder how many more times between now and then military pay will be held hostage or worse suspended because the super committee can’t come to an agreement. I’ve spent the last few months stocking up on supplies to get us through.

milwife88 on September 30, 2011 at 2:13 PM

Wasn’t that the whole purpose? Obama and the Global Governance crowd, planned and enacted redistribution of U.S. and European wealth, while at the same time third world countries were to be given certain advantages to help raise their economies such as so called “Free Trade.” But of course this is just the beginning.

SGinNC on September 30, 2011 at 2:14 PM

The only thing that has been keeping our economy chugging along is brisk gun sales (thank you FBI) and solar panel plant construction.

esnap on September 30, 2011 at 2:14 PM

you owe me a clean keyboard.! :^)

orbitalair on September 30, 2011 at 2:08 PM

Heh.

BobMbx on September 30, 2011 at 2:16 PM

So, what, exactly, would a depression look like? As different from this, I mean? I certainly don’t think it’s continual months of contraction… the US didn’t shrink from 1929 to 1939 without a break, I’m sure.
Vanceone on September 30, 2011 at 1:30 PM

An extended period of time where public and corporate policy prevent the labor market from clearing by freezing wages at artificially high levels.

Count to 10 on September 30, 2011 at 2:18 PM

The only thing that has been keeping our economy chugging along is brisk gun sales (thank you FBI) and solar panel plant construction.

esnap on September 30, 2011 at 2:14 PM

See that? Government stimulus does work! /s

UltimateBob on September 30, 2011 at 2:24 PM

One question though: The 10 million stimulus dollars spent on the “Fast and Furious” scheme, how exactly was that….*scratches head*…how was that supposed to create jobs? I mean other than Mexican funeral homes hiring extra staff to keep up with the demand.

Bishop on September 30, 2011 at 1:59 PM

Those are shovel ready jobs, one must admit.

Vashta.Nerada on September 30, 2011 at 2:27 PM

The same experts that said the govt would make money with GM’s bailout, only to see the govt lose $18B.

angryed on September 30, 2011 at 2:12 PM

Yeah…great investors here. Paid $67B for a company that, on its best day ever had a market value of $57.2B. And that “best day ever” wasn’t the day before it filed for bankruptcy. For the taxpayer to be made whole on its investment, GM would have to have a market value of $67.7B.

As far as investing goes, Solyndra was a bad daytrade compared to the losses at GM.

BobMbx on September 30, 2011 at 2:27 PM

Median incomes haven’t risen since 2000.

ernesto on September 30, 2011 at 2:27 PM

Looks like we have a new “W”, and it ain’t the president.

Ward Cleaver on September 30, 2011 at 2:28 PM

Median incomes haven’t risen since 2000.

ernesto on September 30, 2011 at 2:27 PM

So why hasn’t jug-eared Jesus done something about it?

Ward Cleaver on September 30, 2011 at 2:29 PM

So, what, exactly, would a depression look like? As different from this, I mean? I certainly don’t think it’s continual months of contraction… the US didn’t shrink from 1929 to 1939 without a break, I’m sure.
Vanceone on September 30, 2011 at 1:30 PM

That’s because they were overvalued then. Of course, the Bush tax cuts contributed to that statistic artificially by increasing take home pay without decreasing pre-tax pay. As the market found the new equilibrium, pre-tax pay had to fall (or at least not increase as fast as it otherwise would have). Of course, take home pay went up substantially.

Count to 10 on September 30, 2011 at 2:33 PM

Count to 10 on September 30, 2011 at 2:33 PM

Oops, copy and past fail. That was supposed to be for Ernesto.

Count to 10 on September 30, 2011 at 2:34 PM

Median incomes haven’t risen since 2000.

ernesto on September 30, 2011 at 2:27 PM

And now they are falling. Congrats?

lorien1973 on September 30, 2011 at 2:53 PM

Please show us how the wealth was “spread around”.

bayam on September 30, 2011 at 1:45 PM

Um this?

Pelosi: Unemployment Checks Fastest Way to Create Jobs

Fallon on September 30, 2011 at 3:00 PM

Please show us how the wealth was “spread around”. It’s a popular right wing talking point and delusion that has no basis in fact. Under Obama, taxes on the wealthiest have remained at record lows while the upper class has continued to prosper while middle class families have suffered.

http://www.businessinsider.com/gundlach-presentation-dollars-cents-2011-9#-25

T

bayam on September 30, 2011 at 1:45 PM

Two years of unemployment benefits, a hugh increase in food stamp participants as well as WIC users and actually, the tax revenue from the wealthy has increased.

Vince on September 30, 2011 at 3:08 PM

This comes as no surprise. Analysis by the CBO and similar models designed by Wall Street analysts pegged negative economic growth for 2009 and early 2010 if not for the effects of federal stimulus

No matter how many times you try to claim the stimulus was good or made sense – you and I both know that is a lie. First, the stimulus wasn’t even good policy if you are a true believer like yourself – instead of spending money on worthwhile things to stimulate the economy, the stimulus was nothing more than a democrat interest group payoff to unions and the like. Second, the stimulus was an utter, utter failure.

Monkeytoe on September 30, 2011 at 3:37 PM

Monkeytoe on September 30, 2011 at 3:37 PM

Third: government spending doesn’t stimulate, it just sucks money out of the private sector to accomplish said corrupt failure.

Count to 10 on September 30, 2011 at 3:45 PM

This is what spreading the wealth around looks like. And just what sort of story were we expecting after the wealth-spreading began?

Please show us how the wealth was “spread around”. It’s a popular right wing talking point and delusion that has no basis in fact. Under Obama, taxes on the wealthiest have remained at record lows while the upper class has continued to prosper while middle class families have suffered.

http://www.businessinsider.com/gundlach-presentation-dollars-cents-2011-9#-25

T

bayam on September 30, 2011 at 1:45 PM

Awkwardly for your point, it was Obama specifically who said it was better to “spread the wealth around.” So the “popular right wing talking point and delusion that has no basis in fact” was one created by a hard-left president.

Of course, you’re right about one thing. He didn’t spread the wealth around. Somehow, the only thing he spread around was economic loss and recession. But he certainly intended to spread the wealth around. He’s just too incompetent to understand that the act of spreading wealth around always backfires, and makes everybody less prosperous.

Still, I congratulate you on your continued attempts to appeal to authority by citing “Wall Street experts.” Surely those backward conservatives will believe anything coming from a Wall Street expert!

Maybe you don’t understand economics or conservatives any better than Obama does.

tom on September 30, 2011 at 6:02 PM

Wall Street analysts

bayam on September 30, 2011 at 1:45 PM

LOL

Del Dolemonte on September 30, 2011 at 7:18 PM

Median incomes haven’t risen since 2000.

ernesto on September 30, 2011 at 2:27 PM

Source please? According to the US Census, Median Income rose between 2001 and 2003, from $42,900 to just over $45,000.

http://www.census.gov/hhes/income/histinc/h13.html

Del Dolemonte on September 30, 2011 at 7:24 PM

That governor christie sure is fat, isn’t he?

lorien1973 on September 30, 2011 at 1:27 PM

“Corporate Jets.”

Axe on September 30, 2011 at 7:40 PM

No matter how many times you try to claim the stimulus was good or made sense – you and I both know that is a lie.
Second, the stimulus was an utter, utter failure.

Monkeytoe on September 30, 2011 at 3:37 PM

Yes, the stimulus did not prevent a collapse into another Great Depression- that was simply a fantasy. The financial system and economy cannot possibly collapse- God’s own hand supports both.

Your mastery of finance and economics truly puts the Fed and CBO to shame. You and Sarah should co-write an economics book to help educate us all.

Of course, you’re right about one thing. He didn’t spread the wealth around. Somehow, the only thing he spread around was economic loss and recession.

Do you understand the concept of a balance sheet recession or the consequences of a massive asset bubble collapse? Another President isn’t going to suddenly ignite economic growth in the face of repressed demand.

The same experts that said housing would never go down.
The same experts that said with porkulus, unemployment would stay below 8%

There were many ‘experts’ who called the great recession, the housing bubble collapse, and the failure of the stimulus to restore growth. Noriel Roubini is one prime example. You should read the financial press more regularly. But ultimately the future is very hard to predict- even for experts.

Is your solution to ignore the ‘experts’ and instead turn to Rush? Do you see a herbalist instead of an doctor with a fancy medical degree because you can’t stand those ‘experts’?

bayam on September 30, 2011 at 7:52 PM

This is depressing. I dread Christmas this year. Things are tight. I just wonder how many more times between now and then military pay will be held hostage or worse suspended because the super committee can’t come to an agreement. I’ve spent the last few months stocking up on supplies to get us through.

milwife88 on September 30, 2011 at 2:13 PM

Hang in there kid. A lot of us are bobbing. You know what to do: get the trash on ebay; get the treasure on the pantry shelf; get all the cards but one into the drawer and tape them there; etc. We’re within arms reach of significant political change, and we don’t even need to make it that long. We only need to make it to being sure of significant political change. The whole economy is waiting for this one little statement from the ether:

“It’s ok to risk.”

But all this unsolicited advice is cheeky and should stop with a period.

Axe on September 30, 2011 at 7:55 PM

bayam on September 30, 2011 at 7:52 PM

You’re such the tool . The thing you don’t tackle is the results of Obama’s methods. Look at the employment numbers, the deficit,the debt,health costs, and on and on. He is a failure.

Also, do you mean to tell me that just like the idiot who goes and maxes his credit cards and looks like he is just doing fine to his neighbors and friends is not still in the crapper? The piper has to be paid. Good luck.

Oh and please tell me again that you leftist were not more outlandish in your depictions of Bush and even McCain than the Obama in a diaper sign.

CW on October 1, 2011 at 8:00 AM

Rush?

bayam on September 30, 2011 at 7:52 PM

We can just about always count on your Straw Man.

CW on October 1, 2011 at 8:01 AM