Personal Income Statistics – What Do They Mean?

Today the U.S. Bureau of Economic Analysis (BEA) released their monthly figures on personal income for December. I think they could use a lesson in making their data understandable to the general public. I’ve worked with these data for years and still have to read their releases a few times to make sense of the basics.

Personal income includes all types of incomes that individuals can receive: wages and salary from your job(s); interest and dividends from your banking/investment accounts; rental income; self-employment income; and percent transfer income like food stamps and other benefit income.

So, personal income nationwide went up by about $61 billion between November and December. Seems like a lot but that’s out of $13.1 TRILLION in total personal income or only 0.5 percent. Still, that’s a pretty good increase considering the November to December increase was only 0.1 percent.

In addition to personal income, the BEA tracks Personal Consumption Expenditures (sorry, spending) too. In December, spending was up only 0.1 percent from November which means Americans actually had an increase in disposable income but chose to save it instead of spend it. Surprising in the holiday season.

You should be feeling better knowing that you have more money in your pocket! But do you really? Over the entire year of 2011, income and spending pretty much kept pace with each other. So that increase in December probably doesn’t feel like it’s putting more income in your pocket. Besides, unemployment, while falling, remains stubbornly high, state and local governments are holding back and cutting jobs, and housing in many areas of the country is still lagging if not still falling.

There are some bright spots on the U.S. economic horizon but it’s still a long climb out of the recession. We tend to always expect quick fixes to our economic woes but the pervasiveness of the housing decline and financial market debacle means there are NO quick fixes.

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