Real Personal Income Declines for the 9th Time in 10 Months

March 31, 2022

•

4:36 pm

•

18 comments

•

Economics

Spending and Income data from BEA, chart by Mish

The Bureau of Economic Analysis (BEA) released Personal Income and Outlays data for February of 2022 today.

The spotlight on this post is on real (inflation adjusted) Personal Consumption Expenditures (PCE) and real income.

The difference between “real income” and “real disposable income” is the latter is after taxes.

Inflation adjusted, real disposable income actually declined for the 10th time in 11 months but I called it 9 of 10 because of stimulus distortions.

Real Income and Spending Billions of Dollars

Real Income and Spending data from the BEA, chart by Mish

Chart Notes

The three rounds of fiscal stimulus, one under Trump and two by Biden are clearly visible.
The stimulus radically distorts month-over-month numbers and year-over-year percentage numbers one year later. My title “9th time in 10 months” factors out a huge month-over-month percentage decline due to stimulus distortions.
The difference between Real Personal Income (yellow line) and Real Disposable Personal Income (red line) is taxes.
Real income has been declining for nearly a year.
The difference between disposable income and spending is savings. But most of the saving is from high wage earners, not the bottom half of the nation mostly living paycheck-to-paycheck.

I emphasize real income and spending because that’s what drives GDP.

Table as Presented by the BEA

Table Notes

Chained dollars are inflation-adjusted (real) dollars.
Disposable personal income rose by 0.1% in February, but accounting for inflation, real income dropped by 0.5%.
Prices rose by 0.5% or more four consecutive months, three of them by 0.6%.
The PCE price index, not the CPI is the Fed’s preferred measure of inflation.

CPI Up Most in 40 Years

For more on the CPI, please see Consumer Price Index Jumps to 7.9 Percent, Another New Four-Decades High

Alleged “Benefits of Running the Economy Hot”

Meanwhile, Charles Evans, president and chief executive officer of the Chicago Fed wants to run the economy hot.

For discussion, please see Chicago Fed President Praises the “Benefits of Running the Economy Hot”

2021 Set New Annual Records for Home Prices. 2022 Continues the Trend

Finally, please note 2021 Set New Annual Records for Home Prices. 2022 Continues the Trend.

The Fed does not consider home prices as part of inflation. They are not in either the CPI or the PCE price index.

For discussion, please see the above link.

This post originated on MishTalk.Com.

Thanks for Tuning In!

Please Subscribe to MishTalk Email Alerts.

Subscribers get an email alert of each post as they happen. Read the ones you like and you can unsubscribe at any time.

If you have subscribed and do not get email alerts, please check your spam folder.

Mish

Subscribe to MishTalk Email Alerts.

Subscribers get an email alert of each post as they happen. Read the ones you like and you can unsubscribe at any time.

This post originated on MishTalk.Com

Thanks for Tuning In!

Mish

18 Comments

Newest

Oldest Most Voted

Inline Feedbacks

View all comments

JeffD

2 years ago

The difference between “real personal income” and “real disposable personal income” in your chart seems to only account for FICA tax, half of which is paid by you and half by employer (100% paid by you if you are self employed). Am I missing something?

RonJ

2 years ago

“Real Personal Income Declines for the 9th Time in 10 Months”

Is that long enough to be a trend?

Bam_Man

2 years ago

Reply to RonJ

It’s pretty much been the trend since 1973.

KidHorn

2 years ago

We get poorer every day. I don’t see how we avoid a recession in 2022. People have to be holding off on purchases after seeing price hikes. Slowing consumption is typically the first step toward recession.

Karlmarx

2 years ago

Reply to KidHorn

Gotta agree – of course GDP now is up on todays numbers – go figure

Scooot

2 years ago

Reply to Karlmarx

Isn’t it boosted by price rises.

StukiMoi

2 years ago

Reply to Scooot

By price rises and every other figure of silly arbitrariness which can be dreamt up.

The sooner the gullible indoctrinati grows up, and wises up, sufficiently to recognize that “GDP” has no real economic meaning at all, and instead serve only a propaganda function to keep pliant dupes bent over and duped, the better off they will all be. GDP, like GMW, just an arbitrary number. Arbitrary numbers can be anything that those who make them up/publish them want them to be. And hence, have no meaning beyond that. That’s it. And that’s all.

Scooot

2 years ago

Reply to StukiMoi

It always makes me think of cinema box office sales, the latest films are the ones that break the records, because they’re measured in dollars etc. They should use the number of tickets sold.

StukiMoi

2 years ago

Reply to Scooot

+1.

Any measure of wealth; and growth/delta wealth, for it to have any useful purpose at all for understanding for the real world, needs to be similarly stable across time, eras and places. Social science fields with time horizons, and aspirations to generality, extending beyond those of Cramer on CNBC and “investment product” hucksters; more often than not end up using energy consumption per head. Food calories as well, but that starts getting vague outside of developing countries.

But all processes takes energy. How much the median guy has free and clear access to, is hence decent measure of actual wealth. Not even remotely close to perfect, since economics is in no way whatsoever amendable to empiricism. But if one insists on pretending it does, it’s hard to beat energy consumption for generality. If nothing else, it maps most big wealth improvements; fire, domestication of animals, hydropower, coal and oil, likely over time nuclear and “renewables”; to general wealth improvements reasonably well.

Scooot

2 years ago

Reply to StukiMoi

Maybe, but the problem with using energy consumption as a measure of wealth is, it would encourage everyone to use more energy. ie “We’ve used this much this year, what a good job we’ve done.” Don’t know what or if there’s a good answer but we can agree GDP is seriously flawed.

StukiMoi

2 years ago

Reply to Scooot

When competent people try to measure something, they attempt to measure it as accurately as possible.

Whether some anorexic gets “encouraged” one way or the other, by a competently designed bodyweight scale, has precious little to do with it.

Higher GDP is not in any way economically preferable to lower GDP. Higher WEALTH, as in higher “potential” to consume, is a general good. But whether that potential is taken out in the form of added leisure, or added measurable consumption, says nothing about wealth itself, and instead reflect nothing more than arbitrary preferences over the period in question.

The reason energy consumption has come to be a fairly standard metric for wealth, not just consumption; is that it over time, wealthier people do end up consuming more. Not all of them, not all the time. But in general, over time, those who are wealthier, tend to spend at least part of that additional wealth on additional consumption. Hence, there ends up being a correlation between the two. And since wealth cannot, even in principle, be even remotely close to “measured”, somewhat correlated effects is the best that can be done.

Unless one is a historian, it’s a rather moot point anyway. As Acton pointed out, it is Liberty which is the highest goal. Not “wealth”. Nor anything else. To the extent people prefer wealth, what matters is that they are free to pursue it. As long as people are maximally free, whatever wealth they happen to use that freedom to build, is the best that can be done. There exists a hard zero possibility to improve on that outcome, by any budding Dear Leader tying to “manage” what he, always erroneously, believes is some mysterious guy named “the economy,” which he can somehow “measure” nor “model.”

Maximus_Minimus

2 years ago

Reply to KidHorn

I went into a mode of buying only necessities after a long period of strategic purchases.

Unfortunately, didn’t join the property gold rush, but then who would expect the cretins in charge of monetary policy to go over the cliff, and even brag about it.

Tony Bennett

2 years ago

yeah, well … who needs income? … we’re all eating lentils, anyways … besides my IRS refund check will be here soon … oh shoot, IRS said refunds will be delayed this year … wait, what!?!? the child care tax credit (which I blew LAST year) was an advance on refund (rather than free loot) …. oh, OK, I’ll just tap into my home equity with a refi … what? refinance applications down 60% year over year due to higher rates? …….. hhmm, how much a pound for aluminum cans?

KidHorn

2 years ago

Reply to Tony Bennett

We don’t hear much about the child tax credit prepayments. Has to be a gut punch to those with young kids to realize they have to pay a lot more this year than last.

dbannist

2 years ago

Reply to KidHorn

THat’s not actually true.
The child tax credit more than doubled, but you could only take half of it as a prepayment. That means that even for those who took the prepayment, they still got more than last year. THose that didn’t take the prepayment got a lot LOT more.

KidHorn

2 years ago

Reply to dbannist

it went up, but it didn’t double.

link to whitehouse.gov

Karlmarx

2 years ago

Reply to Tony Bennett

The good news is that aluminum prices are soaring, so even though you cant afford the canned beverages, at least you will get more from dragging yourself through the heat to gather them up.

Maximus_Minimus

2 years ago

An alternative headline: rising paper wealth sinks some boats, and powers say, let them eat cakes.

Real Personal Income Declines for the 9th Time in 10 Months

Share this:

Recommended Articles

Stay Informed

Subscribe to MishTalk