March consumer spending outpaces wage hikes
Consumer spending in March rose twice as much as personal income, the government reported moments ago. That's good for the economy but potentially bad for individual consumers, who may be outspending their wages.
Personal income in March rose 0.3 percent, but consumer spending rose by 0.6 percent, the Commerce Department said.
The numbers are in line with forecasters' expectations.
Consumer spending makes up about 70 percent of the U.S. economy. Economists are watching consumer spending closely because so far, this has largely been a jobless recovery. The official U.S. unemployment rate, currently at 9.7 percent, has been stubbornly refusing to drop significantly from its recent high of more than 10 percent. Forecasters expect unemployment to remain near 10 percent through at least the remainder of this year.
That means that if the recovery is to continue, it will have to be largely based on consumption, not new employment.
If consumer spending continues to increase but personal income does not, that could suggest that people are putting their new purchases on their credit cards, which is troubling. Indeed, the personal saving rate dropped from 3 percent to 2.7 percent, hitting its lowest rate since September 2008.
Economists worry that the promising gains in consumer spending cannot continue while unemployment remains high.
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May 3, 2010; 8:44 AM ET
Categories: The Ticker | Tags: Consumer Information, Consumer spending, Consumption, Economy of the United States, Home, Twitter, Unemployment, United States
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