Monday, February 02, 2009

Real Disposable Income, Saving Rate UP in Dec.

Buried in today's BEA report on Personal Income is some good news in "Table 10. Real Disposable Personal Income and Real Personal Consumption Expenditures: Percent Change From Month One Year Ago," see chart above. Following two months of negative growth in August and September 2008, real disposable personal income increased in each month of the last quarter, ending in December 2008 with 1.3% growth compared to December 2007. Maybe 1.3% growth in real disposable personal income is not great, but at least it's positive and at least the trend is going in the right direction: up.

The personal saving rate has increased in each of the last four months and reached a 7-month high of 3.6% in December (see chart below), as consumers were able to save $378.6 billion in December (on an annual basis), an amount approximately equal to the annual savings for consumers from falling gas prices.

24 Comments:

At 2/02/2009 10:02 AM, Anonymous iamnorth@gmail.com said...

Great, there's further proof that the upper 10% earners in the US are saving at a disproportionately higher rate than the remaining 90%.

Do these statistics include dollars into questionable investments, such as Bernie Madoff's ponzi portfolio?

 
At 2/02/2009 10:11 AM, Anonymous Anonymous said...

The upper 10% of earners isn't some restricted class. You can get there too. Of course you would have to stop whining and apply yourself. You would have to be willing to risk everything you have. Maybe that's asking a little too much of a lefty.

 
At 2/02/2009 10:20 AM, Blogger 1 said...

"Do these statistics include dollars into questionable investments, such as Bernie Madoff's ponzi portfolio?"...

Hmmm, iamnorth interesting that you didn't ask about the FDR's Ponzi scheme...

 
At 2/02/2009 11:49 AM, Anonymous iamnorth@gmail.com said...

Actually, you anonymous asswipe, I am a conservative republican and enjoy an annual income in the upper 10%.

My rhetorical question was intended to spark intelligent discourse on the validity of the underlying statistics, not whine about my income.

How can you believe and apply statistics toward a viable solution when you do not understand them? Do the savings statistics include my "real estate acquisition and rehabilitation projects" investments or do those dollars include only that which banks and investment firms report on traditional savings vehicles such as one might find on their annual savings statements?

If the latter, they are misleading because they include only traditional savings vehicles.

Does it make more sense when I communicate with ad hominem attacks on your moron intellect instead of discussing the facts?

Even Dr Perry ignores the facts and suggests his opinion of reality based on said potentially misleading statistics and facts. Go back and read his posts here during, and throughout, 2008 when he was denying a recession.

Haven't you punks learned anything from your leftist 1960's hippies? Question authority.

OK, go back to being morons now. Anonymous ones, at that.

 
At 2/02/2009 12:20 PM, Blogger misterjosh said...

Phrase of the day! "Actually, you anonymous asswipe..."

North, I don't dispute that the upper 10% are saving at a disproportionately higher rate, but I don't understand how this is proof.

 
At 2/02/2009 12:41 PM, Anonymous iamnorth@gmail.com said...

If you use age and marital status as a proxy for income, unless anyone knows of a more precise barometer out there and readily available, unemployment is in greater percentage quantity for younger people than older.

ftp://ftp.bls.gov/pub/suppl/empsit.cpseea9.txt

It requires just a little manipulation to derive the percentages.

Assuming OLDER people earn higher incomes than YOUNGER people (stage of career, longevity, more responsible positions, etc), and OLDER people are in greater employment than YOUNGER people based on the unemployment statistics, it suggests that OLDER people who are EARNING MORE are , thus, saving more than YOUNGER PEOPLE who are earning less and/or unemployed.

Why is this a bit frightening? Because all of you young whippersnappers evading the workplace by staying in school for your graduate degrees will be moving back in with your parents because you haven't saved enough to sustain yourselves during lean times and playing hell with OUR quality of life paying for your sorry asses instead of enjoying expensive dinners out and traveling. Note for "asswipe anonymous": that is a rightist old person joke not to be taken wholly seriously.

But there is some element of truth to that sentiment. What are YOU going to do when school is out, you've got no job offer, and your student loans, car payments, and credit card bills are due?

You default. And it affects those of us who are invested and who have saved.

 
At 2/02/2009 1:44 PM, Blogger 1 said...

"My rhetorical question was intended to spark intelligent discourse on the validity of the underlying statistics, not whine about my income"...

Ahhh, O.K.... My bad...

Well then regarding your question: "Do the savings statistics include my "real estate acquisition and rehabilitation projects" investments or do those dollars include only that which banks and investment firms report on traditional savings vehicles such as one might find on their annual savings statements?"...

Are you saying that the BEA's PERSONAL INCOME AND OUTLAYS news notes doesn't answer your questions?

What sort of reports would work for you?

Serious questions because I'm pretty sure you are hardly alone in your condition...

 
At 2/02/2009 3:47 PM, Blogger Bruce Hall said...

You are correct that the return to the pre-price spike for gasoline is helpful for individuals and allows them to return to a more "normal" distribution of their expenditures. However, it should be obvious that correction alone did nothing more than relieve some budget stress; it did not necessarily improve the pre-spike saving or discretionary income.

Give the loss of home equity, stock market equity, and overall income levels, I'd say real grow is probably illusory... unless you want to pick a very short timeframe that allows you to start from a very low point. Then you are saying the ER restarted the heart and everything is looking really good even though the patient is on a ventilator.

 
At 2/02/2009 4:34 PM, Anonymous Anonymous said...

Real personal consumption expenditures for either gasoline, fuel oil and other energy goods (line 9) or energy goods and services (line 23) found in BEA Table 2.3.6 have been basically flat this decade. Consumers spent slightly less real dollars on energy in 2008 than in 2007.

The recent up tick in the personal savings rate seems to have no correlation to energy prices.

 
At 2/02/2009 4:38 PM, Anonymous iamnorth@gmail.com said...

1:

Actually, I am not looking for any reports. The fundamentals of our economy, even a year ago, seemed to be taking a dip toward recession -- while all along, Dr Perry was denying it and pointing to statistics like these to support his opinion.

My point is that continued reliance on these kinds of facts in a vacuum and without understanding their composition and importance and effect on the macro-economy is leading academics like Dr Perry to incorrect and/or flawed conclusions.

http://mjperry.blogspot.com/2008/03/reset-libor-rate-for-subprime-arms.html

http://mjperry.blogspot.com/2008/02/vote-chooser.html

http://mjperry.blogspot.com/2008/04/monster-employment-index-up-2-points-in.html

http://mjperry.blogspot.com/2008/02/flawed-wsj-editorial-wages-are-price.html

http://mjperry.blogspot.com/2008/02/rich-getting-richer-and-poor-are.html

 
At 2/02/2009 5:34 PM, Anonymous Ralph Short said...

Iamnorth, I would have to ask the question why does a one or two year drop on your "investments" demonstrate an error in the reports. My invenstments have also deteriorated over the last year but with the equity issues I moved most of it and with the real estate I know it will come back. That is to say it is always long term not short term. With savings accounts, CD's, lower credit purchases, paying down debt, they are all short term.

Nevertheless, they show a trend and a pattern for the future. I believe it is what some economists call a correction.

With regard to "professional students" seeking degrees into their 30's, well, that to me is the parents fault if they even indicate they can move back with them. They apparently did not train their offspring to be self sufficient.

God nor anyone other than Marx as far as I know said it was going to be a perfect world.

 
At 2/02/2009 8:37 PM, Anonymous Michael S. said...

The amazing thing is that we heard people complaining about the low personal savings rates during the recovery. Now that the personal savings rate is high, the economy has gone into a downturn! It was the same during Reagan -- people complained about record low personal savings rates, yet the economy was doing well by most measures.

This post is a good indication that some indicators that we hear people complain about (housing affordability, trade balance, share of income to the top 1%), have weak correlations to overall economic performance and consumer welfare.

I agree with the earlier comment that the personal savings rate is also not even a good indicator of savings. In better economic times, people's assets grow in value, so they spend more of their earned income and leave savings to their assets. It doesn't mean people have less accumulated value (consider the growth of household net worth despite drops in the personal savings rate). In weaker times (like now), when returns on assets are low, people substitute saving from their current income, which drives up the personal savings rate as a result of poor economic performance.

 
At 2/02/2009 8:43 PM, Blogger wcw said...

Glad to see we loony leftists aren't the only ones whom the local AnonX:YZ annoys. Good on you, iamnorth; we may disagree about policy, but we can agree that data and the validity of statistics matter.

If you want to see unemployment by income, no need to guesstimate: download the CPS and crosstab it yourself. Cf http://www.bls.census.gov/cps_ftp.html However, if you want to see savings rates you'll have to brave a data set that is not the easiest to maneuver, the Fed's SCF. I think 2004 is the most recent available for download (this one is every-three-years): http://www.federalreserve.gov/PUBS/oss/oss2/scfindex.html

As for savings rates, I could go on at length, but I think the short story involves housing wealth. Goldman estimated the housing-wealth effect at something like 0.3; if housing is down 25% nationally, you'll see 8% real spending retrenchment eventually, headed of course for savings.

 
At 2/02/2009 9:58 PM, Anonymous Dr. T said...

I'd like to interject another factor into this somewhat unfriendly debate. One important reason for the increased percentage of savings of disposable income is that disposable incomes went down and savings didn't go down as much (proportionately).

For example, an hourly worker may have $50 a week sent to his IRA. He normally earms $40,000 plus another $10,000 in overtime per year. But, he now gets no overtime work due to the recession. The $2,600 IRA contribution was 5.2% of his total income. Now, that same $2,600 is 6.5% of his lower income.

The good news, therefore, isn't that absolute savings per household are up. (They aren't.) The good news is that despite a 70% decline in disposable income, people continue to save.

 
At 2/02/2009 10:01 PM, Anonymous Ralph Short said...

Why is it the people who are now complaining about the falling housing values never talked about how ridiculous the "appreciation" was between 2002 and 2006. That was a bubble and it had to burst. It kind of reminds of the Unions always asking for "profit sharing" but were dead silent about sharing in the losses. At least the people who purchased Dot com equities in the late 90's did not whine when that bubble burst. Those that speculated on real estate increasing exponentially indefinitely, and therefore over leveraging themselves were being foolish, stupid, greedy or all of the above.

The fact is wealth is a variety of components in anyone's portfolio. The other fact is the trend of people saving more in one component because another has depreciated is still a good sign.

Unfortunately, we do not see the same from "our" government which wants to add to it's already enormous debt by borrowing more, hiring more and spending more.

Nothing like having a credit card without limits.

 
At 2/02/2009 10:40 PM, Blogger Plamen said...

"If you use age and marital status as a proxy for income, unless anyone knows of a more precise barometer..."

iamnorth, care to try education and hours worked? I am not contending that your variables are useless, but age is at least not linear... and marital status would seem to be a constraint on hours worked. What I am saying is: back when I dabbled in applied econometrics, I consistently found that education was the best predictor for most social variables - crime rate, income, voting patterns, etc. It ended up with staying power in most models. I probably should not say that the other good predictor was race - to the extent that the data were amenable to using it, which is often not the case.

 
At 2/03/2009 9:47 AM, Blogger wcw said...

It's been my experience that the variables you absolutely must have are gender, education, income and race.

The CPS has nice versions of all four.

 
At 2/03/2009 9:48 AM, Blogger wcw said...

..d'oh: and age. That one's so basic I assumed I'd typed it before gender. Mea culpa.

 
At 2/03/2009 7:01 PM, Blogger 1 said...

iamnorth@gmail.com says: "My point is that continued reliance on these kinds of facts in a vacuum and without understanding their composition and importance and effect on the macro-economy is leading academics like Dr Perry to incorrect and/or flawed conclusions"...

Hmmm, I'm thinking that this whole recession thingie right now is effecting you more than me but the operative phrase is, 'right now'...

I still have a job, I've lost very little compared to some in my IRA accounts (less than 3%) and I don't own a home on purpose...

So for me at least, Dr. Perry's optimism/conclusions has pretty much paralleled my own experiences to date...

Over the last two years I've seen right around where I live the poor actually get rich and jobs in certain sectors go wanting for lack of people applying...

I know it could all change next week or next month but so far Dr. Perry's conclusions haven't been that far out of line with my own experiences...

 
At 2/04/2009 7:25 PM, Anonymous poor boomer said...

Anonymous (my favorite author) said:

The upper 10% of earners isn't some restricted class. You can get there too. Of course you would have to stop whining and apply yourself. You would have to be willing to risk everything you have. Maybe that's asking a little too much of a lefty.


Your response was to "iamnorth" but I'll toss in my two cents.

I'd love to get into the top 10 percent - heck, I'd be hyappy to get into the top 50 percent. But a number of people tell me it's too late for me, and nothing can be done.

WHat do you think?

 
At 2/04/2009 7:27 PM, Anonymous poor boomer said...

p.s. I voted the conservative position on eight of ten ballot issues in November. Don't think I'm all that lefty.

 
At 2/04/2009 7:31 PM, Anonymous poor boomer said...

iamnorth@gmail.com said:

What are YOU going to do when school is out, you've got no job offer, and your student loans, car payments, and credit card bills are due?


They will end up like me. I pay 65 percent of my income to rent a room in a house with eight people,15 percent of income for student loans, 10 percent for health insurance, and I live on fumes and food stamps.

 
At 2/04/2009 7:34 PM, Anonymous poor boomer said...

1 said:

Hmmm, iamnorth interesting that you didn't ask about the FDR's Ponzi scheme...


I've been complaining about the regressive Ponzi scheme for years. (e.g. the working poor have shorter lifespans and much lower marriage rates, thereby getting a really crummy deal from the scheme.) And it drives me nuts that lefties don't see a problem with it.

 
At 2/04/2009 7:39 PM, Anonymous poor boomer said...

1 said:

Over the last two years I've seen right around where I live the poor actually get rich and jobs in certain sectors go wanting for lack of people applying...


And what sectors might those be? And are people not applying because they don't have the required skills?

 

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