Personal income rose 0.4%, with a negligible downward revision to August. Disposable income and private-sector wage income rose comparably, up 0.4% and 0.5%, respectively, also with negligible revisions to prior data. These decent gains followed—and thus offset—softer increases in August, barely above zero for total income and wage income, and 0.1% for disposable income.
The soft August data reflected the impact of Hurricane Harvey. The better September gains came despite the incidence then of Hurricanes Irma and Maria. Note that for the payroll jobs data earlier this month, the hurricane effects were felt in the September data, but not in the August data. This reflects the nature of the data collections involved.
Payroll data cover persons at work—and related hourly wages—for the pay period covering the 12th of the month. (Whether that pay period is a month, a fortnight, or a week depends on the payroll schedule of the employer.) For employers with weekly or bi-weekly payrolls, the pay period ending September 12 was well before Harvey struck, so the hurricane effects were not reflected in payroll jobs data until the release of September data.
Income data, in contrast, largely reflect income earned over the entire month, and while affected Gulf Coast workers may have lost a full week’s income in August, holding down that month’s income data, the effects were more muted in September.
In any case, the hurricane effects in August and the apparent, after-hurricane snapback in September did little to disturb ongoing trends in income growth. As seen in the accompanying chart, growth in both disposable income and private-sector wage incomes bounced only slightly with the September news and generally remain below the growth rates in place through September 2016.
We have been less sanguine about consumer spending prospects, precisely because of the slowing seen in income growth over the last two years. Those optimistic about improving consumption growth point to the low unemployment rates and booming stock market. However, to the extent falling unemployment reflects an improving job market, it is fully reflected in the income data, which nevertheless remain sluggish. Similarly, stock prices have been booming for years, but it has typically been the income data which have restrained consumption, and that is likely to continue to be the case.
Elsewhere in today’s news, consumption also showed better growth in September, but that improvement also was merely an offset to weak, hurricane-related spending data in August.