U.S. Reports Higher Income, Spending Levels

WASHINGTON — Americans’ personal income rose strongly in both November and October after adjusting to exclude distortions from surges in farm subsidies and auto workers’ bonuses, the government said Wednesday.

The Commerce Department said income fell a slight 0.2% in November to a seasonally adjusted annual rate of $4.18 trillion, following a jump of 1.7% in October, the biggest in a year.

But, excluding the two special factors that occurred in October, personal income rose 0.6% in November and 0.8% in October, both significantly stronger than the inflation rate.

White House spokesman Roman Popadiuk said: “Personal income continues to rise at a healthy pace and in line with gains reported over the past 12 months.”

Personal consumption spending, which includes everything except interest payments on debt, rose 0.6% to a seasonally adjusted annual rate of $3.32 trillion last month after a robust 1.0% gain in October.

‘Going Out With a Bang’

The numbers were in line with expectations and had little effect on the financial markets. On Wall Street, the Dow Jones index of 30 industrials, down 6.61 on Tuesday, slipped another 1.43 points to 2,164.64. Bond prices and interest rates were little changed.

“It looks like 1988 is going out with a bang,” said Robert Brusca, an economist with Nikko Securities Co. International in reference to the income and spending report.

However, Brusca said the new statistics are likely to displease the Federal Reserve Board, which has been raising interest rates in an attempt to slow the economy. The Fed’s goals are to slow inflation and to ease domestic consumer demand so manufacturers can produce enough exports to whittle the U.S. trade deficit.

“We are living beyond our means and in order to put that thing (the trade deficit) back in place we’re going to have to do much better at living within our means,” Brusca said. “Mr. Bush’s campaign song--’Don’t Worry, Be Happy’--is still well in place.”

With spending rising faster than income in November, the personal savings rate--savings as a percentage of after-tax income--dipped to 4.3% from 5.2% in October. Economists say one way to curb the trade deficit is to increase Americans’ saving.

Disposable Income Drops

Disposable, or after-tax, income declined 0.3% in November following a 1.7% gain a month earlier. It was the first decline since April, when annual income tax payments depressed personal income by 1.4%.

Wages and salaries, key components of personal income, were up 0.4% to a $2.52 trillion annual rate in November following a large 1.5% increase caused by bonuses to auto workers. Manufacturing salaries edged down 0.5% after a 2.2% increase in October.

Sandra Shaber, an economist with the Futures Group, a Washington consulting firm, said growth in the number of jobs rather than in inflation-adjusted income accounts for most of the rising income.