Friday, May 28, 2004

Everyone is going ga-ga over the April personal income report released today.
The increase reported by the Commerce Department on Friday came after a brisk 0.5 percent advance in March and suggested that consumers continued to do their part to support the economy.

Americans' incomes, meanwhile, rose by a strong 0.6 percent in April, marking the largest gain since January 2001. The growth in income last month, which followed a 0.4 percent rise in March, was especially encouraging because that is the fuel for spending in the future.

The income and spending figures are not adjusted for price changes.
Well, let's look at these numbers in real terms instead, then.

While nominal personal income rose 0.57%, real personal income ticked up a lower 0.44%. The all-important wages and salaries increased 0.53% in nominal terms but 0.40% in real terms. These numbers are indeed positive for those looking for a sustainable recovery, but not robustly so. In real terms for the period of the last seven months, these April figures are slightly better than average.

Real employee compensation growth for the last three months is at 4.0% in annualized terms, and real wage and salary growth is up 3.1%. Of all the numbers, these seem the most welcome for the sustainable recovery crowd.

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