Friday, October 28, 2005

Looking a Little Closer at the Economic "Growth"

Today it was announcd that the economy grew 3.8% in the 3rd quarter of 2005. That being an aggregate number, it is important to look at the details. Spending's going up, but wages and disposable income are not.
The increases in spending came even as disposable personal income growth slowed to 2.8 percent from 4.9 percent. Adjusted for inflation, disposable income fell 0.9 percent after increasing 1.5 percent in the second quarter. Some of the drop was attributable to lost rental and business income on the Gulf Coast after Katrina and Rita lashed the region.

In another report released today, the Labor Department said the employment cost index, which is comprised of wages, salaries and benefits, rose 0.8 percent in the third quarter from the second quarter. But adjusted for inflation, the index was down 1.5 percent from September 2004, with the wages and salary portion dropping by 2.3 percent.

Some economists saw the income and wage data as another indication that many American workers are falling behind even as the economy grows.

...The G.D.P. price index, a measure of inflation, rose 3.1 percent, up from 2.6 percent in the second quarter.

The personal saving rate fell into negative territory, minus 1.1 percent, from 0.1 percent. That indicates that people were paying for their increased spending by borrowing more money.

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