Investing September 3, 2002

Stagnant Jobs, Flat Incomes Don't Slow Spending

September 3, 2002 (PLANSPONSOR.com) - Thanks to a stagnant job market, worker incomes were flat in July, but that didn't restrain their spending tendencies.
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Worker incomes, which include wages, interest, and government benefits, were flat in July, compared with a 0.7% spike in June.  Wages and salaries actually fell by 0.2%, according to the Commerce Department.  Disposable or after-tax incomes rose by 0.2% after a 0.7% increase the month before.

Income growth was weaker than the 0.2% increase anticipated by many analysts, while the 1% growth in spending was stronger than the 0.7% increase anticipated.  In fact, July’s spending increase was the largest – and the incomes the lowest – since October.

With spending outpacing income growth in July, the nation’s personal savings rate – savings as a percentage of after-tax income – dipped to 3.4% in July from 4.2% in June.  That was the smallest rate since December.

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