 | Personal income up 0.5% and personal consumption up 0.4% in October |
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Implications: Great news on the labor market today, with jobless claims plummeting and incomes rising sharply. New claims for unemployment insurance fell 34,000 last week to 407,000, the lowest level since July 2008. Meanwhile, continuing claims for regular state benefits fell 142,000 to 4.18 million, the lowest in two years. These figures, as well as the recent upward trend in payrolls, suggest private-sector payrolls are increasing in the 175,000 to 200,000 range in November. More jobs and more hours are translating into higher total pay. Personal income increased 0.5% in October. However, including upward revisions to prior months, incomes were up 1%. This is not just a function of government transfers. In the past year, "real" (inflation-adjusted) income excluding government transfer payments (like unemployment insurance, Social Security, and Medicare) is up 2.1%. In the past six months, real private-sector wages and salaries are up at a 3% annual rate. As a result of rising earnings, consumer spending has not only continued to increase but has accelerated in recent months. Real consumer spending is up 2.3% versus a year ago and up at a 3.1% annual rate in the past three months. On the inflation front, consumption prices are up only 1.3% versus a year ago, 0.9% if we exclude food and energy. The latter measure – "core" inflation – is the excuse the Federal Reserve is using to implement quantitative easing.
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