I am getting tired writing about dour news, but I have to call them as I see them as the saying goes. On that note, we got a troubling piece of news regarding the consumer on Friday that I thought was newsworthy and felt compelled to mention. In a nutshell, people’s incomes are falling, and it couldn’t come at a worse time.
First Time In Two Years
The Commerce Department said that personal incomes fell 0.1% in August, which is the first decline in almost two years. Wages and salaries, the lifeblood of consumer spending, dropped 0.2%. Spending actually increased by 0.2%, which is good and bad. It is good because the consumer is still buying things and creating economic activity, but it is bad because they are dipping into their savings, which dropped to 4.5%, its lowest level since November 2009.
The general takeaway from this report is the same thing we’ve heard for years: more people need to be working and making more money. Economists are still predicting stronger growth in the last part of the year, but I again ask how? Energy prices have come down, so that will be an incremental boost, but that by itself is not enough to stoke spending to sustainably higher levels.
No More Alphabet Soup
So far the “TARP”, “QE”, “TWIST”, “TALF”, “ABCDEFGHI…” hasn’t done much to spur growth. One could argue that without those, we would be much worse off, but nobody will ever really know the answer to that. We have to stimulate demand right now. Drowning the banking system in money has not and will not work because that money is not being lent out to businesses and consumers.
Some sort of massive infrastructure project could be a possible solution, but the gridlock in Washington is too heated for this to be a reasonable option right now. That’s unfortunate because we will keep seeing dismal data like this unless the powers that be step it up and stop bickering.
Key Data Shows Consumer Still Suffering is an article from: 
