Economy

US Worker Pay Growing Faster Than Inflation, but Still Slow

Paul Ausick

Published: April 29, 2016 12:05 pm

Last Updated: January 13, 2020 10:05 am

In its report on personal income and spending for March, the U.S. Bureau of Economic Analysis data show that personal income in current dollars grew by 0.4% month-over-month, and personal spending (called personal consumption expenditures, or PCE) rose by 0.1%. Real disposable personal income rose 0.3% in March and real PCE increased by less than 0.1%. “Real” figures are given in chained 2009 dollars.

Consensus estimates had called for month-over-month growth of 0.3% in personal income and 0.2% in spending.

New car sales have slowed this year, up just 0.1% in March after growth of 0.2% in both January and February. Spending on durable goods, including new cars, dropped 0.6% in March and spending on non-durable goods rose slightly, due largely to lower fuel prices.

Personal saving rose from $696.4 billion in February to $735.5 billion in March, a savings rate of 5.4% compared with 4.1% in the prior month.

The price index for PCE rose less than 0.1% in March, equal to the consensus estimate and better than the 0.1% decrease in February. Excluding food and energy, the PCE price index also increased 0.1%, less than the 0.2% hike in February.

Year over year, the PCE price index rose 0.8% in March and the index excluding food and energy rose 1.6%. Inflation remains well short of the Federal Reserve’s 2% target, and combined with a first-quarter total compensation increase of 1.9% indicates that U.S. workers are earning enough to cover higher costs. Still, the pace of wage growth is considerably below the average 3% growth in the period from 2002 to 2007.