Bad News from Personal Income Report

In today’s personal income report from the BEA, real personal consumption was up by 0.3%, which according to many commentators was a sign that the economy was improving. Bloomberg had a short piece with the headline:

U.S. Stocks Rise as Consumer Spending Boosts Economic Optimism

But I look at the numbers and say something very different. I see that real personal income, leaving out transfer payments, fell in February for the second straight month. So I would have written the headline a different way:

Consumers Keep Spending Because the Government is Giving Them Money

The private sector shows no sign yet organically generating growth. That is to say, the real personal income generated by jobs and private businesses and investments is falling, once we omit the effect of government transfer payments, such as unemployment insurance, Social Security, Medicare, and Medicaid. Here’s a little graph:

Not a good sign, by my lights.

About Michael Mandel 127 Articles

Michael Mandel was BusinessWeek's chief economist from 1989-2009, where he helped direct the magazine's coverage of the domestic and global economies.

Since joining BusinessWeek in 1989, he has received multiple awards for his work, including being honored as one of the 100 top U.S. business journalists of the 20th century for his coverage of the New Economy. In 2006 Mandel was named "Best Economic Journalist" by the World Leadership Forum.

Mandel is the author of several books, including Rational Exuberance, The Coming Internet Depression, and The High Risk Society.

Mandel holds a Ph.D. in economics from Harvard University.

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