If we look at real disposable personal income growth from the latest BEA data update we see what might appear to be, on the surface, a robust recovery:
Quarterly data shows similar traction:
But real data has benefited from falling energy prices and nominal flows are not as strong, in fact if we focus on nominal flows we are in the midst of a clear downward movement:
We can see this better when we compare nominal and real quarterly rates of change:
Nominal flows peaked back in early 2015 and real have fallen back from early 2016 levels: the trend is best shown in the nominal flows. If we look deeper into the data we can also see that recent increases have been in personal income receipts on assets and proprietor’s income while wage flows have decelerated. Month to month and quarter to quarter are notoriously difficult to predict but the recent trend is deceleration. Today’s employment report suggests that wage pressures may well be easing.
The longer term picture remains relevant: weak income growth can build over time and the cumulative impact of such also impacts expenditure trends:
Consumer credit growth has been well above growth in personal disposable income in the current cycle and stands at historically high levels:
And wages adjusted for population are even weaker, on long term metrics, than the weak headline figure:
It is also worth noting that the market based measure of personal consumption expenditure is at its weakest since market based PCE data is available.
Annual increases (real) in average weekly earnings have also decelerated from mid 2015:
And before we lead onto the next point:
The headline data is aggregated and ignores the increasing income inequality in the US. In Striking it Richer: The Evolution of Top Incomes in the United States (Updated with 2014 preliminary estimates) Emmanuel Saez, UC Berkeley, June 25, 2015, average real income growth between 2009 and 2014 was 8.4%, but this was split 27.1% to the top 1% and 4.3% to bottom 99%. Growth rates of disposable income and earnings mean increasingly less in aggregate. Rather than reproduce graphs myself I will refer readers to
The following charts are from the Centre on Budget and Policy Priorities