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Slow growth in household income; administrative note [ClearOnMoney]
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Slow growth in household income; administrative note

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Commentary

Slow growth in household income; administrative note

8 May 2012 by Jim Fickett.

Real, organic household income is up a sluggish 1.6% year-over-year. The US remains in recovery mode but this shows, especially against the backdrop of decelerating job growth, the fragility of the recovery.

Last week the Bureau of Economic Analysis reported on household income and spending.

Real disposable household income, the measure of income most important for spending, has been almost flat for some time – up only 0.6% year-over-year. To a significant extent, this is because government stimulus programs are winding down. Real organic income, that is, income before government transfers, is probably a better measure of the underlying health of the household sector, and looks a little better, with a 1.6% increase YOY:

I and many others have noted for a long time that the long-term trend in income does not support the long-term trend in spending. But for now spending continues to grow faster than income (inflation adjusted, up 1.9% YOY):

Administrative note

Household income and spending change rather slowly and, despite the importance of the data, and the best efforts of reporters to turn minute fluctuations into news, long-term investors only need to check the data now and then. I will start updating my views on these data only quarterly, when the GDI numbers come out.