Skip to comments.Incomes Drop Most in 20 years
Posted on 03/01/2013 6:12:48 AM PST by safetysign
Consumer spending in the U.S. rose in January even as incomes dropped by the most in 20 years, showing households were weathering the payroll-tax increase by socking away less money in the bank.
Household purchases, which account for about 70 percent of the economy, climbed 0.2 percent after a 0.1 percent gain the prior month, a Commerce Department report showed today in Washington. The median estimate in a Bloomberg survey of 76 economists called for a 0.2 percent advance. Incomes slumped 3.6 percent, sending the saving rate down to the lowest level since November 2007.
Employment gains, the rebound in housing and growing demand for autos will probably keep supporting consumer spending in the first quarter as the worlds largest economy picks up from an end-of-year slowdown. Even so, rising gasoline prices and the need to rebuild nest eggs may make it difficult for households to match last quarters performance.
Its going to be touch and go for the consumer for the next few months, said Ryan Sweet, a senior economist at Moodys Analytics in West Chester, Pennsylvania, who correctly projected the 3.6 percent drop in income. The consumer is going to be able to support the recovery, but theyre not going to be able to take it to a higher level, he said.
Stocks Drop Stock-index futures held earlier losses after the report. The contract on the Standard & Poors 500 Index maturing this month dropped 0.4 percent to 1,506.7 at 9:03 a.m. in New York.
Projections for spending ranged from a drop of 0.2 percent to a 0.4 percent gain.
The Bloomberg survey median called for incomes to fall 2.4 percent.
The slump in incomes in January was the biggest since January 1993 and followed a 2.6 percent jump in December. Some companies paid dividends and employee bonuses earlier than usual before tax rates went up this year, removing a gain usually seen in January. The Commerce Department estimated the January level of wages was reduced by about $15 billion and December was boosted by about $30 billion, reflecting the timing of the bonuses.
The saving rate dropped to 2.4 percent from 6.4 percent. Disposable income, or the money left over after taxes, dropped 4 percent after adjusting for inflation, the biggest plunge since monthly records began in 1959.
Consumer Spending Adjusting consumer spending for inflation, which renders the figures used to calculate gross domestic product, purchases rose 0.1 percent in January for a second month, todays report showed.
Consumer purchases grew at a 2.1 percent annualized pace in the fourth quarter, up from 1.6 percent in the previous three months, as Americans bought more durable goods including automobiles.
The economy grew at a 0.1 percent rate from October through December, less than forecast, as companies reined in gains in inventories and national defense outlays dropped 22 percent, the biggest since 1972, Commerce Department data showed yesterday.
Todays report showed a price gauge tied to consumer spending, which are the figures tracked by Federal Reserve policy makers, was little changed in January from the prior month. Over the past 12 months prices rose 1.2, the smallest year-to-year gain since October 2009. The rate compares with the central banks goal of 2 percent.
Excluding food and energy costs, prices climbed 1.3 percent in January from the same month in 2012, the smallest year-to- year gain since April 2011.
Less Inflation Little inflation, combined with sluggish growth, mean Federal Reserve policy makers are likely to continue unprecedented monetary easing measures.
Available information suggests that economic growth has picked up again this year, Bernanke said earlier this week in testimony to the Senate Banking Committee in Washington.
Still, Bernanke cited an estimate from the nonpartisan Congressional Budget Office that the spending cuts known as sequestration will cause a 0.6 percentage-point reduction in growth this year.
Given the still-moderate underlying pace of economic growth, this additional near-term burden on the recovery is significant, he said.
The expiration of the payroll tax cut in January, coupled with climbing gasoline prices, are trimming discretionary income and may damp household purchases in the first quarter.
Payroll Tax Congress and President Barack Obama allowed the payroll tax to return to its 2010 level of 6.2 percent from 4.2 percent at the start of the year, which means an American who earns $50,000 is taking home about $83 less a month.
The average price of a gallon of regular gasoline at the pump rose to $3.78 on Feb. 27, little changed from the previous days rate that was the highest in more than four months, according to AAA, the biggest U.S. motoring group.
On a brighter note, sentiment is rebound as employment grows. The Conference Boards sentiment index jumped in February from a revised 58.4 in January, data from the New York-based private research group showed this week. The measures 11.2- point jump was the biggest since November 2011, offsetting much of the almost 15-point slide over the previous three months.
Interest Rates Interest rates hovering near record lows and growing availability of credit are buoying the auto industry, including Fort Lauderdale, Florida-based AutoNation Inc. (AN), the biggest dealership group in the U.S. Attractive financing may push sales comfortably above 15 million this year, the highest since 2007.
We have the best financing available for our customers ever, Mike Jackson, chief executive officer of AutoNation, told a J.D. Power & Associates conference this month in Orlando, Florida.
Cars and light trucks sold at a 15.2 million annual rate in January after 15.3 million in December, according to data from Wards Automotive Group. Including Novembers 15.5 million rate, auto sales over the past three months have been the strongest in five years. February data is scheduled for release today.
But you won’t get 47% of the country to acknowledge that.
Still “Bush’s fault”, even though he’s been out of office 5 years, and didn’t have congress for the last 2 years of his admin.
So, 7 years later, it’s still not the rats’ fault.
How’s that “fundamental transformation” workin’ out for ya?
If you want to make a liberal mad just tell them this is the Age of Obama and the economy isn’t going to get any better. Works every time for me.
But, but, but, I thought the economy was in recovery?
Hey, look at the stock market. Just see how much the unemployment numbers have been driven down. The price of gasoline is some kind of historic level. We are producing a larger percentage of our own energy domestically than we have in years.
Mexico is looking kind of good, at the moment.
I tell them the economy
isn’t any better,
isn’t getting any better,
and WON’T get any better
as long as 0bama is in office and implementing “liberal”, ie, communist, policies.
This is what happens when you create and empower a huge anti-capitalist bureaucracy. The endless rules, regulations and dictates of Obama’s minions have stifled entrepreneurship, the creation of new business and the creation of wealth. The country is poorer.
But yet the Government and msm maintain that the economy is growing.
Yup. We are on the fast track to communism
Mastery of English: 3
Mastery of Democrat talking points: 10
(That's a "Chorus Line" reference: "Looks: 3, Dance: 10")
What a load of bs:
>>Excluding food and energy costs, prices climbed 1.3
4$ gas suffocates growth
also didn’t mention moving workers from full to part time
which will be devastating for any growth prospects
...and bread is over $3/loaf and gasoline is near $4/gal. Shame on this evil, greedy government for oppressing its citizens.
The economy is clearly in trouble. We have no real recovery. People are barely surviving and are now cutting into savings when their incomes drop. Yet, as others pointed out, a lot of Americans don’t seem to blame Obama and didn’t think that this horrible recovery was reason enough to kick him out. To the contrary, a lot of people’s answer to this is that we should hand out even more government checks and move further down the path of Welfare State Socialism that is killing us.
I say, "just four more years of this to go."
When he was elected, just after the crash, I told them, "this is going to last for ten years."
They didn't like that either.
I'm not liking it much, myself. But the fact that they're suffering for voting foolishly brings me some consolation.
Any more ‘recovery’ and we can all enjoy the spectacle of a national economy being given futile shocks with a giant defibrillator.
That is some recovery we got going on.
Cutting into savings.....correct, they are and for two reasons. Reason one is their pay is going down. Reason two is their savings are being eroded by “hidden” inflation. One more, they are getting no return on their savings and some have now jumped into the junk bond markets and growth stocks, a misnomer in a recession, and will get the double whammy, loss of principal and no ROI.
From CNBC just now:
“Stocks opened lower on the first day of March, with the Dow sliding below the widely-watched 14,000 level, weighed by a weaker-than-expected personal income report and disappointing economic data from Europe and China.
In addition, investors will be watching the last-minute budget talks in Washington as the $85 billion sequester, automatic budget cuts, go into effect Friday.”
OK now it is starting.
The revenue did not increase, because it is headed to China.
That is right. We offshored our manufacturing.
We buy stuff from China. China makes the money.
They grow. We shrink. See how easy that is.
(not joking here, not even one tiny bit)
Yeah, love it. The ‘sentiment’ index is up? Yep, there’s nothing like rising fuel and food prices coupled with declining incomes to get everybody in a chipper mood.
That's the problem. These people don't care how many other people suffer. As long as they get theirs, they're fine with it. A check could be as low as one dollar, and they'll still rape and plunder other people to get their hands on it.
Notice they're not mentioning the out of control costs of obomacare. It's already bleeding the population dry, and it isn't even mentioned! Imagine how bad those "tweaked" numbers would be if the cost of obomacare was added to them.
With all that money printing and a population begging government for food as much as the Great Depression, they're not even close to telling us how bad the economy really is.
The money printing is driving us into a bond crash. Student loans aren't being paid because there are no jobs. Another housing crash is inevitable because the democrats Reinvestment Act is still on the books.
Unemployment can go no where but up. No jobs = no expendable cash. No cash = no buying. No buying = no producing. No producing = more layoffs.
The only way to save the economy is to slash the size of government in half and give the American people their money back. It worked in the 1920 depression, and it'll work now.
For once in his deplorable life, ZerO should resign for the sake of the country.
So if we drive less, eat less food and keep our thermostats a 65 we'll all feel richer! Reminds me of Jimmah telling everyone to wear a sweater and put a brick in their toilet tank.
Could be used as an argument that things got so good under Bush that there is still a little money left to spend despite the atrocities of the last 5 years........Of course it might also be a sign of despondency and demoralization as folks under Zero have just given up any hope of salvaging a future...
The reason why we're suffering is simply because government is taking more resources from the private, or freely trading, sector. Command economies, like the government, are horribly inefficient, meaning that they generally don't fill the wants of the people that they supposedly serve. They serve themselves first.
Headline on AOL: "What is the dreaded sequester?"
Freakin' useful idiots.
impeach this piece of crap Obama
This is with technology increasing exponentially in the PRIVATE sector. Even with this incomes are declining while food and gasoline prices rise.
He considers an economic crash to be "social justice." The radicals on the left believe an economic crash would level the playing field, so the poor will have an equal chance to get ahead.
Liberals have no foresight, which is why everything they do ends in disaster. People are poor because they chose to screw up their lives and believe it's everyone elses fault, so they'll continue to do it. People are poor because they're lazy. They believe everyone else should work to care for them, so they'll continue to be lazy. The productive, who believe they should work and care for themselves will continue to be productive and care for themselves.
In the end, the country will be rebuilt, and the freeloading democrats will still be beggars. The productive right will continue to be productive and prosper. All the suffering caused by the radical left will have been in vain, because character matters. They're forgetting about that part.
You just aptly described the FDR admin.
We are living through another dimrat induced depression while the media then and now just can’t see any of the forest for all those trees in the way.
I think we are at various spots on the performance curve, observationally.
I’m not debating China has been a boom for itself and to a lesser extent America - except in the way China’s boom has benefitted principally China.
Only. That is what I do not believe any of us has come to terms with yet. China is now winning.
They have the world’s largest export engine, and are in our markets completely freely.
Playing the Chinese market as their own market.
This is rigged. China plays China’s market as China’s. China plays everyone else’s market as the room for competition.
We treat our own market as the rooms for competition.
This is a huge difference.
I believe it is time to begin designing a market protection device of some sort.
We are doing it all wrong.
Or it could be a sign that people are converting soon-to-be-worthless currency into harder assets.
Do you mean the giant defibrillator they call "QE1", "QE2", "QE3"...?
2013-1959=54 (years) Way to go, Obama! [Do I really need a sarcasm tag?]
Excluding food and energy costs, prices climbed 1.3 percent in January from the same month in 2012, the smallest year-to- year gain since April 2011.
How convenient! Unfortunately, those of us living in reality can't just exclude food and energy costs from our budget. I wonder what the percentage increase would be if they included food and energy costs.
The Labor Department uses the ‘Consumer Price Index’ to measure inflation which excludes food and energy. But somehow falling energy prices are a factor for curbing inflation.
Am I missing something?
I'm also sure the Administration has been issuing Woodward-style threats to agencies who know the truth - keep your language vague and mild, or else.
Obama voters will be the hardest hit from Obama theft from Medicare.
” The most salient fact is that, to pass Obamacare, the president cut Medicare by more than $700 billion over the coming decade, according to the Congressional Budget Office (CBO). And these cuts are of the worst kind. They are arbitrary and across the board. They reduce reimbursement rates for all who provide services to Medicare patients, regardless of how well or badly they treat their patients. Among the cuts is a $156 billion reduction in payments to Medicare Advantage plans over ten years. These cuts will force seniors to pay $3,700 more for their health care by 2017, “
Insurers: Cuts to Medicare Advantage will hit poor, minorities
By Sam Baker - 02/21/13 12:28 PM ET
Cuts to Medicare Advantage will disproportionately hurt poor seniors and minorities, the health insurance industry said Thursday.
America’s Health Insurance Plans (AHIP) has pushed back hard against a proposed cut to private Medicare Advantage plans. The Obama administration proposed the 2 percent cut late last week.
AHIP argued Thursday that Medicare Advantage isn’t only popular with seniors, but especially with low-income and minority seniors.
Medicare Advantage is a lifeline for millions of low-income and minority Medicare beneficiaries who rely on the high-quality coverage and innovative programs and services these plans provide, AHIP President and CEO Karen Ignagni said in a statement.
Private Medicare Advantage plans are more popular among black and Hispanic seniors than they are overall among seniors, according to AHIP’s report.
AHIP also said 41 percent of Medicare Advantage recipients have an annual income of less than $20,000, compared with 37 percent of all Medicare beneficiaries.
To paraphrase Ronald Reagan when talking about Jimmy Carter:
A recession is when your neighbor loses his job,
A depression is when you lose your job,
A recovery is when Barack Obama loses his.
Those are ships!
They need to call it what it is: intentional devaluation of currency. At least the UK had the honesty to call a spade a spade in the 60s and 70s!