Personal Income Jumps in Month : Tax Refunds Cited; Some Concern on Weak Rise in Wages

Americans’ after-tax personal income, boosted by the belated receipt of tax refund checks, climbed a record 2.9% in April, the government said Monday.

While President Reagan pronounced the nation in “good economic health,” some analysts expressed concern about the weak growth of wages in the private sector that showed up in the Commerce Department report.

The gain in after-tax, or disposable, income in April followed declines of 0.4% in March and 0.7% in February. Both of those drops were blamed on computer problems that delayed processing of tax refund checks in those two months.

The surge in refund checks last month put more money in Americans’ pockets and pushed personal consumer spending up by 0.7%, a sharp reversal of the 0.2% decline in March. Economists predicted further gains in coming months as more of the late tax payments reach consumers.

The refund snafu had a ripple effect throughout the entire economy, holding down economic growth by 1 percentage point during the first three months of the year, some economists estimated.

The gross national product, the broadest measure of economic health, grew at a weak 1.3% annual rate during the first three months of the year, the slowest pace since the end of the 1981-82 recession.

The government will revise that GNP estimate today, and many analysts are predicting that the revision will take growth even lower, perhaps down to 0.5%.

The National Assn. of Business Economists released a new survey of members Monday that showed that 58% of the economists surveyed believed that the country would suffer a mild recession next year because of the battering the industrial sector is taking from foreign competition.

But Reagan dismissed the pessimists, saying during a Rose Garden ceremony at the White House that America is in “good economic health. . . . As summer follows spring, inflation will remain low and our economy will continue to grow, creating still more jobs.”

Wall Street took heart, staging a big rally on the action late Friday by the Federal Reserve Board to lower the discount rate to 7.5%, its lowest level in almost seven years. A cut in the discount rate--the interest rate the Fed charges in making loans to banks--is the most dramatic action that the central bank can take to signal its intention to push interest rates lower to restore a flagging economy.

While many economists were predicting that interest rates will head lower, they expressed concerns about the durability of the current recovery.

They noted that, while after-tax income was up 2.9%--a record monthly increase--the gain in overall personal income was a smaller 0.6% in April, following a 0.5% March increase.

The overall income gain came even though private wages and salaries advanced in April at only about half of the March pace and manufacturing payrolls actually declined in April.

“The forward momentum of the economy has stopped,” said John Albertine, president of the American Business Conference, a coalition of high-growth companies. “The action by the Federal Reserve Board to lower the discount rate came not a moment too soon.”

Robert Ortner, chief economist for the Commerce Department, said the April overall income gain would have been an even smaller 0.4% without a boost provided by government subsidy payments to farmers and back wages paid to postal workers in a new contract.

However, Allen Sinai, chief economist for Shearson Lehman Bros., predicted that the economy would rebound substantially in the April-June quarter, in part because consumer spending will remain strong.

“There is no evidence of a recession or a major slowdown in the second quarter. Consumption spending appears to be catching up now that the tax refunds are getting into the economy,” he said.

The 0.7% increase in personal consumption spending, which includes virtually everything but interest payments on debt, came from healthy increases of purchases of both goods and services in April.

The report showed that Americans’ personal savings rate--savings as a percent of disposable income--climbed to 5.9% in April, up sharply from the March rate of 3.8%.

The changes put personal consumption spending at an annual level of $2.466 trillion in April, while personal income rose to an annual level of $3.174 trillion.