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By the Numbers

Featuring brief segments of economic analysis from our senior economist Michael Bazdarich, PhD.

The economic analysis we previously featured in By the Numbers is now available on the Western Asset Blog. This page will no longer be updated.

August Personal Income: Decent Gains Amid an Up and Down Year

If consumer spending is going to take off, it would be helpful if personal incomes took off first, especially with many households still cautious and lacking easy access to credit. Today’s personal income release for August showed decent gains. Total personal income was up 0.3%, in line with trends of preceding months.

Within personal income, we pay more attention to private-sector wage income, as it reflects payroll trends more so than the other components of personal income. As seen in the chart, private-sector wage income grew a healthy 0.5% in August after average gains of 0.3% in the previous four months.

As can also be seen in the chart, wage income got off to a strong start this year, despite the weather effects that held back other economic aggregates in 1Q14. After registering strong growth over January to March, however, wage incomes fell back to the aforementioned slower pace of April to July. The better growth seen in August is about halfway between the strong growth of winter and the slower growth of spring and early summer. One month does not a trend make, but, again, the August data are a first move back to the upside.

Meanwhile, real consumer spending showed a 0.5% gain in August, but most of that above-trend gain was due to a rebound in utility spending, reversing its July drop. Average July and August together, and consumer spending shows about the same growth trend as has been in place for the last three years.

Our forecast has been for continued sluggish growth. Today’s income news was more in line with the stronger growth expected by the Federal Reserve and Wall Street consensus, but not dramatically so. We’ll have to see whether these better gains are sustained in months to come.

Private-Sector Wage Income
September Income Trends Chart
Source: Bureau of Economic Analysis, Western Asset. As of 31 Aug 14. *4Q12 data adjusted for tax avoidance effect.

Michael Bazdarich

Product Specialist/Economist

Mike brings more than 45 years of experience to his position. "By the Numbers" will address economic data releases that are pertinent to a broad range of investors.

Prior to joining the Firm in 2005, Mike ran his own consulting firm, MB Economics. He earned his PhD in Economics at the University of Chicago.

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