US Worker Pay Growing Faster Than Inflation, but Still Slow

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.
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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.