As part of its historical revision to GDP, the BEA also had to adjust personal income and spending, with the full results released in today’s July report. What it revealed was striking: over the revised period, disposable personal income for US household was slashed cumulatively by over $120 billion to just under $14.4 trillion, while spending was revised higher by $105 billion, to just above $13.8 trillion. There were two immediate consequences of this result.
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First, as the following table shows, while government pay has remained roughly flat over the past 3 years, growing in the mid-2% to mid 3% range, wages and salaries for private workers have been steadily declining as the blue line below shows, and after hitting a 4% Y/Y growth in February, wage growth has slumped to just 2.5% in June, the lowest since January 2014 when excluding the one-time sharp swoon observed at the end of 2016.
But a more troubling aspect of today’s revision is what the drop in income and burst in spending means for the average household’s bank account: following the latest annual revision, what until last month was a 5.5% personal saving rate was revised sharply lower as a result of the ongoing downward historical adjustment to personal income and upward adjustment to spending, to only 3.8%.
In dollar terms, this revision means that a quarter trillion dollars, or $226.3 billion, in savings was just “wiped away” from US households – if only in some computer deep in the bowels of the BEA buildings – who as a result have that much less purchasing power, and following the revision the total personal saving in the US as calculated by the BEA is now down to only $546 billion, down from $791 billion before the revision.
This means that either households will have to incur this much incremental debt to continue on the previous spending “trendline”, or a quarter trillion in potential growth from the future economy (recall 70% of US GDP is the result of consumer spending), has just been chopped off.
The devil may be in the details on how they determine ‘personal savings’ and ‘personal income’.
The Government calculates “savings” as a residual to balance the GDP account, hence its big revision.
The party is over , what can you expect when government and business plot and plan to destroy the earning power of average Americans while driving up stock values to ultimately create the largest transfer of wealth in history destroying the middle class . This was and is no accident . All the compiled figures are generally false when it comes to private sector incomes because the MILLON dollar CEO is lumped in with brick layers and electricians . Real 40 hour jobs that pay what should now be a minimum of $65 dollars per hour do not exist for skilled trades people . Since all the pressures of health care and retirement are on that wage earner $65 per hour figure is cutting it close . Government and industry continue to import cheaper labor legal and illegal . Mean while government wage and employment has been left fairly steady only due to increasing national debt . Government retirement plans so underfunded and courts demanding no reductions in payments while private sector retirement plans evaporate with barely a wink and a nod . Then came the 401 k plans where the private sector employee puts up all the money with some employer input some not and in the final analysis the individual puts up 100% of the funding takes 100% of the risk 100% of any loss but only 30% of the gains . Who in the hell sold American working people this big fat NOTHING BURGER ? The government and industry ! At least Jesse James faced you with a gun when he robbed you !
“The government and industry” may (I stress may) have instituted all those things you complain about but it is the people at large that have elected their representatives to make them law and gleefully taken part in them.
Do or have you supported any of the things you rail against by participating in them, and after voting for the politicians that instituted them in the first place?
Boat Guy,
That $65/hour,along with an entitlement attitude and unreliable workers,combined w/lots of regulation and taxes, is what spurs automation and offshoring.
Tampa Red did it ever occur that work ethic evaporated when skilled people were thrown overboard along with the cute title of legacy costs that were discharged first in bankruptcy as the outsourcing went into high gear while still being taxed to support politicians and the entitlement mentality of Washington . You are falling into the blame game that the wealth powers that be want where your shit is stuff while my shit is shit .
Do the math what $10 dollars per hour bought in 1980 with a defined benefit package $65 per hour can barely touch .
America had skilled trained people with experience and work ethic and the young people today witnessed their parents and grand parents tossed overboard one by one and then came the flood of illegals . Now we have a generation with few skill sets and a fuck it attitude . I have encountered good young people who know the deal for them has been broken so they choose not to play !
As for anonymous of course I voted in every election and the last democrat I voted for was Clarence Long in 1972 . Sadly now even Andy Harris is a RINO along with governor Hogan . Like most republican politicians they talk a great turn around game and leave us twisting in the wind while the democrats play the finger point game while sucking one thumb and shoving the other up each other’s asses and should you ask what the hell is going on they switch thumbs . The only choice we have in America is paper or plastic !
First, estimate all economic numbers are adjusted 5% for political reasons.
Then, say the adjustments started in about 1970 when TPTB decided to delete the middle class.
$1000 @ 5% compound interest (or 5% fake) for 47 years = $9906.
So, by 2017 the 5% fakery has now become almost 9x the original $1000.
That gives you an upper limit on how fake the govt. numbers could be.
All the various 5% adjustments don’t always go in the same directions, but the fakery and adjustments do compound over time. So when ‘they’ try and use their own numbers its Garbage in, Garbage out. GIGO.
Every government-generated “statistic” and “number” is suspect until verified independently. If it cannot be verified independently, then it is a lie and probably a wild-ass guess (WAG) as well. If it can be verified independently, then it will not match the government-generated number unless it is irrelevant, immaterial or inconsequential.
If it can be verified independently, is relevant, material and consequential, it is a MIRACLE.
That’s the beautiful magic of taxes and inflation……
There all COMPOUNDING as time marches forward!!
Soccer Mom says “Oh the government said it’s only 2%”……
2% compounded yearly since 1972 is a helliva lot of inflation in 2017!!
“oh right… Soccer Mom didn’t pass her math exam”……..
Funniest stuff I’ve read in a while. Nothing,zero,zilch,Nada compares to the Fed’s power to destroy both buying power and our wealth via their printing press .