short comment: (1) it's a mistake to rely on one month's statistics to judge what's happening, especially when a lot of the other statistics (such as July's employment report) are not looking very good; (2) one thing that happens in a recession is that the "last fired, first fired" phenomenon, which tends to raise the average wage, since those with more senority are paid more.
The rise in the saving rate is a bad sign during a recession, though it may not be large enough to have any effect.
Jim Devine [EMAIL PROTECTED] & http://bellarmine.lmu.edu/~jdevine
> -----Original Message-----
> From: pms [mailto:[EMAIL PROTECTED]]
> Sent: Friday, August 02, 2002 10:20 AM
> To: [EMAIL PROTECTED]
> Subject: [PEN-L:29042] Big Income Gains? Comment?
>
>
> Friday August 2, 9:11 am Eastern Time
> Reuters Business Report
> Consumer Spending Up on Big Income Gain
>
> WASHINGTON (Reuters) - U.S. consumer spending rose solidly in
> June as income
> advanced at the fastest pace in nearly two years on the back
> of big pay
> gains, helping cash registers ring out the second quarter on
> an upbeat note,
> the government said on Friday.
> ADVERTISEMENT
>
>
>
> Consumer spending rose 0.5 percent in June after holding
> steady in May, the
> Commerce Department said. Spending in May had originally been
> reported as
> down 0.1 percent.
>
> Personal income in June increased 0.6 percent, its biggest
> advance since a
> matching rise in July 2000. The June income gain followed a
> 0.4 percent May
> rise, a tick stronger than originally reported.
>
> The report was just a hair off Wall Street expectations.
>
> Behind the strong rise in income was a 0.6 percent increase
> in wages and
> salaries -- the largest income component. It was the strongest pay
> performance since an identical increase in January 2001.
>
> Disposable income, the amount left after taxes, gained a
> solid 0.7 percent.
> That helped the saving rate rise to 4.2 percent from May's
> 4.1 percent,
> despite the increase in spending.
>
> Economists have said solid income gains should help support
> spending, even
> in the face of the brutal stock market decline. Still, the
> report offered
> little new information on the economy as the data had already been
> incorporated in the second-quarter economic growth report released on
> Wednesday.
>
> U.S. gross domestic product advanced at a meager 1.1 percent
> annual rate in
> the April-June period, with consumer spending up at a 1.9
> percent pace.
>
> In addition, investors were glued on Friday to the July
> employment report
> from the Labor Department, which showed a paltry gain of
> 6,000 jobs outside
> the farm sector -- fueling further fears of renewed economic weakness.
>
> Friday's income and spending report showed the rise in
> spending in June was
> concentrated on durable goods -- items intended to last three
> years or more.
>
> Durable goods spending rose 1.6 percent, after a 2.6 percent
> drop in May.
> Spending on nondurable goods was up 0.4 percent, while
> outlays on services
> rose 0.3 percent.
>
> The report showed inflation well contained with the price
> index for personal
> spending up a mild 0.1 percent, both overall and when
> volatile food and
> energy prices are excluded.
>
> Economists say continued tame inflation provides scope for the Federal
> Reserve to hold interest rates steady for a prolonged period,
> or even cut
> them further if needed, to ensure the economic recovery does
> not stall.
>
>
