Personal Income & Spending: What Really Happened in May?

The above graphs track the same information over different time frames. The one on the right focuses on the last few years, highlighting the fact that income growth has stagnated.

Today's report announced that personal income increased $167.1 billion from the previous month. Consumption and savings increased as well: savings expanding at a much faster rate than spending. Please review the graph below.





However, the announcement that private wage & salary disbursements, goods producing industries' payrolls, and manufacturing payrolls decreased at a faster rate than the previous month caught me by surprise. In addition, service producing industries' payrolls and government wage & salary disbursements increased at a slower rate than the previous month. How can income expand without wages expanding?

Great question. The answer is........ "Personal Current Transfer Receipts." This figure increased by $162.6 billion in May, representing almost the entire gain in personal income. BEA's definition below:

Personal current transfer receipts

This component of personal income is payments to persons for which no current services are performed. It consists of payments to individuals and to nonprofit institutions by Federal, state, and local governments and by businesses.

Government payments to individuals includes retirement and disability insurance benefits, medical payments (mainly Medicare and Medicaid), income maintenance benefits, unemployment insurance benefits, veterans benefits, and Federal grants and loans to students. Government payments to nonprofit institutions excludes payments by the Federal Government for work under research and development contracts. Business payments to persons consists primarily of liability payments for personal injury and of corporate gifts to nonprofit institutions.

Please allow me to emphasize: "This component of personal income is payments to persons for which no current services are performed."

THAT CONSTITUTES A NET DRAIN ON THE ECONOMY TO BE BORNE BY TAXPAYERS !!!!!!!!!!!!!!!!!!

Wall Street Revenue: Update

The above graphs contain activity through April. It certainly appears that investment bankers will be busier this year than last. However, it is a pale shadow of years past.

Please note the asset backed and non-agency mbs portion of debt underwriting. These figures are virtually non-existent. I believe it is impossible to have the vaunted V shaped rebound consumer spending without these debt markets. This also implies continued weakness in student loan origination.

These borrowers depended on the easy credit afforded to them by the securitization markets. Unless the federal government plans to start lending directly to the people, we will not see this activity again.

Retail Sales

Retail sales rebounded a bit in May: $340 billion ($338 billion in April).

Here is the bad part: retail sales are 9.18% below last year's pace. These numbers are now back to 2005 levels.

Mover in this months report were building material and garden equipment dealers (+1.3%) and gas stations (+3.6%).