U.S. personal income dropped in August for the first time in nearly two years, the Commerce Department announced in a report on Friday.
Economists had expected incomes to rise by 0.2 percent, the Financial Times reports, but incomes declined 0.1 percent instead.
Employers added no new jobs in August and cut hourly earnings for the first time in more than three years, Time Magazine reports. Consumer spending, adjusted for inflation, was flat, darkening the outlook for economic growth.
Paul Dales, senior U.S. economist at Capital Economics, told Time Magazine that the data offered "more evidence that households are in quite a bind.”
According to the Financial Times:
The personal savings rate fell to 4.5 percent in August, the lowest since December 2009, from 4.7 percent, as income drops and poor jobs environment have led Americans to dip into their savings.
“Without income and without wealth growth, spending can only come from savings. The savings ratio did decline and is now down sharply from 5.3 per cent in June to 4.5 per cent in August, but this smacks of a desperate US consumer,” Alan Ruskin, analyst at Deutsche Bank, told the Financial Times.
CBS MoneyWatch reports:
The headline is disheartening, but it misses a larger point: income growth in the US has been slowing for quite some time. According to the Wall Street Journal, real disposable income “averaged 4.5% annual growth in the 1960’s, 3.7% in the 1970’s, about 3% in the ’80’s and ’90’s and only 2.5% last decade.” This year income growth is just over 1 percent, as the economy has stalled out.