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Record Personal Income Increase? Just Early Bonuses and Dividends to Avoid Taxes January 31, 2013

Posted by geoff in News.

Yahoo! News got themselves seriously pumped up over today’s personal income report:

American incomes rose in December by the most in eight years, a positive sign for consumer spending that could help the economy sustain momentum early this year.

Personal income for Americans rose 2.6 percent last month, the Commerce Department said on Thursday. That was the biggest increase since December 2004 and well above analysts’ expectations for a 0.8 percent gain.

The big rise in incomes suggests total consumer spending power entered the new year on stronger footing, even though much of the gains may not have been distributed evenly throughout the workforce.

While they do breezily mention the BEA’s caveat about the data, I don’t think they did it justice, so here’s the BEA’s caution in full:

Personal income in November and December was boosted by accelerated and special dividend payments to persons and by accelerated bonus payments and other irregular pay in private wages and salaries in anticipation of changes in individual income tax rates. Personal income in December was also boosted by lump-sum social security benefit payments. In October, personal income reflected work interruptions caused by Hurricane Sandy. Excluding these special factors, discussed more fully below, DPI increased $44.1 billion, or 0.4 percent, in December, following an increase of $66.5 billion, or 0.6 percent, in November. [emphasis mine]

Yeah, so that record-setting “2.6 percent” is more like 0.4 percent when you take out the tax scare. That suggests that total consumer spending power entered the new year on an unexceptional footing. Another year of the economic blahs.

It’s a shame that the increase in personal expenditures from the GDP report and the increase in personal income from this report are being used to stoke unfounded optimism. The pundits are probably trying to convince themselves that they didn’t vote for the wrong guy.

That’s going to be a whole lot harder when they see the numbers for January.

*Personal income and disposable personal income (DPI) changes track each other very closely.


1. Mr. Matamoros - January 31, 2013

Remember how all the media outlets would report (constantly) how bad the economy was under Bush? I wish we could have some honest reporting now…

2. Mr. Matamoros - January 31, 2013

I also wish I could win the lottery, bring about world peace and fly like Superman…

3. digitalbrownshirt - January 31, 2013

My personal income went down about $4k. Add in the ever increasing medical insurance cost along with everything else and in real dollars it’s at least $6k. I make a decent living, but that’s enough to hurt. I haven’t taken a vacation that involves actually doing anything in over 4 years.

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