Paul Sakuma/AP
A saleswoman gives change to a customer at Best Buy in Mountain View, Calif. Consumer spending and personal income fell in September, according to an Oct. 30 report.
Fall in salaries, wages hurting consumer spending
By Laurent Belsie | 10.30.09
If anyone needs an explanation why consumers are sounding increasingly like Scrooge the closer it gets to Christmas, a new report on personal income offers the answer:
Americans’ paychecks aren’t growing.
They actually shrank 0.2 percent from August to September, according to a Commerce Department report released Friday. Except for a couple months this summer, that was the lowest total since 2006. The fall was more acute in the private sector, but that was masked because government payrolls reached a new record(!) of $1.19 trillion in September.
With income down (because fewer people are working), the prospects for increased spending this holiday season are fading. Consumer spending has been rising at an annual of 2.6 percent from June through September (both before and after the “cash for clunkers” program), points out Nigel Gault, an economist at IHS Global Insight. “The question is whether consumers can keep this up,” he says.
Gault’s answer? Probably not, absent a boost in incomes. He forecasts it will be 1 percent or less in the fourth quarter.
Already, consumers’ outlook had been souring, causing forecasters to predict a dip in holiday spending this year despite high-profile efforts by retailers to generate sales.
Uncle Sam is helping, of course, with the temporary federal tax cut and increased government transfers. But even that won’t be enough to lighten the mood this Christmas, unless it’s coupled with some good cheer and resurgence in the private sector.
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1. James Corbin | 10.30.09
Government payrolls going up, now there’s a shock. Eventually we can all work for the government and instead of paying taxes, we can just pay our own salary. This is an easy way to eliminate unemployment. Simply hire all the unemployed in the government and viola, no more unemployment. Problem solved!