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Incomes Surge, Wages and Salaries Fall

This is entirely due to the administration’s one off $250 payments to various groups receiving government benefits like Social Security; otherwise, the figures were noteworthy because they document that workers received their first quarterly drop in wages in 50 years. Also: savings increased to an almost unheard-of (well, not for more than a decade) 7%, which sits uneasily with the green shoots notions of recovery, dependent as they are on a sustained revival in consumer spending and, especially, in housing. From the Financial Times:

US incomes surge as stimulus kicks in

By Alan Rappeport in New York
Financial Times
Published: June 26 2009 14:16 | Last updated: June 26 2009 15:33

Personal income in the US surged in May thanks to an infusion of government stimulus funds, while consumers raised their spending modestly as confidence about the state of the economy continues to improve.

However, most of the monthly rise was the result of Federal benefit transfers and lower taxes. Americans, still facing rising job cuts and falling home prices, have been hoarding most of the additional funds, lifting the savings rate to a 16-year high in May.

Households are reverting to a more sustainable spending path vis-à-vis income that allows scope for paying down debt and adding to savings,” said Joshua Shapiro, chief US economist at MFR.

Official figures showed on Friday that incomes jumped by 1.4 per cent last month, or $167.1bn, beating economists’ expectations and doubling the previous month’s revised rise of 0.7 per cent.

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