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Personal Income Declines in September

Personal Income apparently declined in September 2010 in the report today from the BEA (Bureau of Economic Research, U.S. Dept. of Commerce).  I say apparently as I have little confidence in the seasonal adjustment factors as a very bad recession and government stimulus is distorting the seasonal adjustment factors.  The headlines:

Personal income decreased $16.8 billion, or 0.1 percent, and disposable personal income (DPI) decreased $20.3 billion, or 0.2 percent, in September, according to the Bureau of Economic Analysis.   Personal consumption expenditures (PCE) increased $17.3 billion, or 0.2 percent. In August, personal income increased $54.4 billion, or 0.4 percent, DPI increased $47.9 billion, or 0.4 percent,and PCE increased $52.5 billion, or 0.5 percent, based on revised estimates.

For larger image click on table.

The tabled data (seasonally adjusted) for most of 2010.

For larger image click on table.

There are always month to month distortions in the data stemming from a variety of factors.  Therefore Econintersect looks at data trends more than data anomalies which are the headlines.  All the graphs below are seasonally adjusted with values at annual rates.

The major reason for the MoM decline in personal income was attributable to the government’s reduction in payments to its citizens for things such as social security and unemployment.  One month of data decline is not a trend, however, this will become a trend if unemployment benefits are not extended to the long term unemployed – and if state government’s continue to cut back on benefits.


Since April 2009, per capita personal income has remained in a narrow band with some months up and others down, showing a slight negative bias.  Per capita personal income is basically flat, therefore the real economy is flat.

Since Mid-2009, personal consumption expenditures have continued on an upward path according to the BEA.  In the past twelve months personal consumption expenditures have risen by 2.8% but disposable income has increased by only 0.6%.  

This personal consumption expenditure number does not square with other data (such as sales tax receipts).   Econintersect has no explanation other than to point out this data anomaly.  Personal savings have remained in a band between 5.3% and 6.0% of personal income this year.  This month’s savings number was on the low end of the band.

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