Personal income plunged by $500 billion in January after it had surged by $350 billion in December. Here is the difference. The surge in December was due to rich people doing tax planning by accelerating income to avoid Obama’s tax hikes. It was completely driven by investment income and bonus acceleration. The drop in January can only be attributed 70% to investment income. Wages hardly ever DROP. They dropped by $43 billion, with all the drop occurring in private industries. GOVERNMENT WAGES went UP!!!!
You’ll be happy to know government entitlement transfers went up as 300,000 more Boomers went on Social Security and thousands more jointed the food stamps rolls and SSDI.
Thank God we live in America – the land of delusion. Even though disposable income crashed by $500 billion and is lower than it was in September, the good old American consumer whipped out that credit card and increased their spending by $22 billion. Something is amiss. Every major retailer in America just reported results as of January 31 that were horrible. Where are these consumers spending the money they aren’t earning? If we supposedly are adding jobs, how can wages be falling?
Inquiring minds want to know. At least our savings rate is back down to 2.4%. That certainly bodes well as taxes increase, gas prices surge, food prices rise, and Obamacare works its magic.
Consumer Taps Out As Income Plunges By Most In 20 Years: Savings Rate Crashes To 2007 Levels
Submitted by Tyler Durden on 03/01/2013 09:02 -0500
When the US income and spending figures for December came out, the punditry couldn’t contain their exuberance following the massive surge in income which as we explained was merely a function of the pulled forward wages and bonuses in December due to fears of what the Fiscal Cliff and the expiration of the payroll tax cut would do to incomes in 2013 (nothing good), as well as a surge in stock dividends to avoid a dividend tax hike resulting in yet another boost in income. The spike in personal income without an offset in spending sent the savings rate to the highest in three years.
Today it’s payback time as moments ago we learned that the US consumer gave back all the December gains and then much following news that while spending did nothing, and came in as expected at 0.2%, personal income imploded by 3.6% on estimates of a modest 2.4% drop. This was the biggest drop in personal income in 20 years just as the US consumer’s confidence was soaring at least according to such manipulated aggregators as UMich. What this also led to was that not only is the stock market back to 2007 levels, but so is the personal saving rate, which crashed from 6.4% to 2.4%, the lowest since November 2007, and leaving Americans with the least purchasing power just as the full impact of a government that is flirting with austerity is starting to be felt. And just as bad was the material 4% pullback in real
disposable personal income or adjusted for inflation.
“Consumers can’t spend what they don’t have, and they don’t much much,” summarized Bloomberg economist Rich Yamarone.
Just don’t tell the TV talking heads on financial comedy TV for whom the only thing that matters is how high two algos can chase the hot potato known as the Dow Jones Industrial Average. .