Many talking heads and the stock market are celebrating the Personal Income and Outlays data for July 2011 that was released this morning by the Bureau of Economic Analysis. Was the data positive? Sure, but certainly one month is not an indicator of long term trends. Our economy has some deep issues and one month of positive numbers won’t make these issues disappear.
Maybe it’s best to show the data in pictures. Now, instead of just showing totals for personal consumption expenditures, disposable personal income and the like, I will show changes from previous year. This should give a better perspective on the situation.
1) Personal Consumption Expenditures.
2) Personal Income
3) Disposable Personal Income
Not surprisingly personal income and disposable income (personal income minus taxes) are kind of flatlining. Oh, I digress.
There are several deeper issues to all of this. We had what economist Richard Koo called a “balance sheet recession”. Basically, families and businesses took on a lot debt based on inflated asset prices. Then sometime in 2007 the House of Cards came tumbling down. Families and businesses turned to paying down massive debt loads instead of buying stuff or consuming. For an economy driven by consumption (over 70% of GDP) having families paying off debt instead of consuming or investing is bad.
One deep issue is what has actually changed from the beginning to the Great Recession until now that will positively impact our economy? I suggest nothing. Sure, Wall Street and corporate profits have bounced back nicely and there was a weak fiscal stimulus the effects of which have worn off but now the emphasis is on deficit reduction. High unemployment will continue to suppress family incomes and debt loads are still high.
Another deeper issue is whether families will continue to pay down debt or even have the means or incomes to do so? Are families essentially still tapped out and still struggling with stagnate wages and higher living costs? We will see. One month of good numbers won’t provide answers to these questions.
economy financial+crisis budget+deficit obama unemployment jobs credit+cards debt social+security deficit personal+finance capitalism bailout mortgage mortgage+crisis economic+crisis wall+street+bailout new+economy retirement+savings job+guarantee credit+unions deficit+hawks economic+stimulus cooperatives health+care+reform financial+regulatory+reform income+inequality federal+debt financial+conglomerates tarp financial+oligarchy 401k worker+cooperatives gdp debt+management new+normal money scams fiat+currency china economic+growth wages federal+reserve globalization savings neoliberal consumer+protection stimulus unemployment+rate tax+cuts middle+class wall+street investing consumer+debt investments financial+planning credit+card+debt debt+settlement federal+deficit democrats republicans stocks government+spending negative+equity risk foreclosure budget bank+of+america foreclosure+fraud taxes consumer+spending cfpa ira inflation class+war jobs+report financial+bailout fiscal+policy evil pete+peterson health+care financial+literacy jobs+crisis foreclosures move+your+money full+employment modern+monetary+theory stock+market neo-liberal checking economic+policy u.s.+treasuries bonds economic+mobility job+growth too+big+to+fail predatory fdic state+of+the+union u.s.+treasury+securities net+worth class+warfare bankruptcy derivatives goldman+sachs mortgages debt+consolidation eu great+recession gold keynes refinance fico+scores debt+crisis credit+scores real+estate mortgage+foreclosure financial+regulation banking+system financial+crisis+inquiry+commission deficit+commission debt+servitude krugman federal+budget de-regulation solidarity free+trade wisconsin debt+collection income+tax refinancing loan+modifications financial+stability+plan poverty trickle+down+economics working+class retirement currency wills economics #finreg tbtf monthly+budget estate+planning consumer+credit auto+industry president+obama gold+standard debt+ceiling center+for+responsible+lending mutual+funds innocent+fraud aig life+insurance personal+income trade+deficit market+fundamentalism consumer+financial+protection+agency cash+flow banking identity+theft fraud compound+interest laid+off citigroup financial+sector foreclosure+gate auto+loans emergency+funds deductibles strategic+defaults keynesian wiped+out productivity+ralph+nader new+era+windows money+market+accounts unemployment+insurance fox+news+channel human+capitalism savings+tip financial+reform arra free+credit+report chicago money+market+mutual+funds afl-cio fox move+money predatory+lending credit+rating+agencies credit+reports fallacy uaw employment principal+reduction roger+ailes close+banking+accounts countervailing+powers refund+anticipation+loans jobs+data moody's revolution tax+reform denmark propaganda banking+services john+k.+galbraith tax+refund debt+forgiveness lehman+brothers cornel+west exuberance disposable+income national+infrastructure+bank corporate+welfare u.s money+manager+capitalism birth+certificate monetary+policy option+arm mortgage+loan+modifications subprime+mortgages corporate+profits interest+rates greece quantitative+easing political+system fundamentals living+wage output+gap success consumption ltcm universal+health+care income+distribution household john+mccain minimum+wage new+democrat+coalition two+americas frontline senate+democrats eurozone debt+commission haymarket american+recovery+and+reinvestment+act oligarchy two+economies income regulations ben+bernanke california+budget catfood employee+ownership existing+home+sales jobless+recovery carried+interest john+edwards robert+reich mark+to+market budgets payroll+tax euro chicago+idea paladino slavery dollar sector+balances gmac life+settlements tax+holiday ireland mlk fannie+mae housing+market cowards bullshit target+date+mutual+funds argentina fierce subprime bad+bank savings+plan alan+greenspan deficit+errorists payroll+tax+holiday phone+scams financial+regulations national+debt free+markets united+states now savings+bonds shadow+banking+system fica+tax madison time+value+of+money cost+of+unemployment ponzi+schemes swipe+fees credit+markets fair+debt+collection+practices+act tax+code #wallstreetscam great+divergence paulson future+value pensions fed+audit debit+cards predatory+home+lenders cash cdo walker warren+buffett treasury+department present+value tax+deal cooperative+economy liquidity u.s.+debt poverty+rates conservatives ppip job+loss 20-year+mortgage obama+tax+deal short+sales cash+management treasury+securities detroit+schools home+buying economic+purgatory long+term+unemployment vicious+cycle bartering emergency+savings efca debt+hysteria home+closing banks deficit+hawk american+capitalism community+gardens economic community+banks debt+to+gdp recession austerity online+scams income+taxes investment inequality estate investment+yields happy+year finreg hyman+minsky american+dream email beige+book mortgage+modifications yuan risk-return investment+advice dot+com+bubble leading+economic+indicators malicious+software deflation corporate+bailouts federal business+roundtable cooperation returns housing+bubble chris+dodd lei deferred+annuities bailouts economic+policies balancing+checkbook alternatives disability+income+insurance scam fiscal+sustainability home+mortgage fixed+rate+annuity lobbyists debt+is+evil balance+check+book credit+report teach-in currency+manipulation bill+gross insurance variable+rate+annuity corporate+tax+breaks credit+card+law deficit+spending tina general+motors economic+indicators budgeting financialization warren+mosler washington+consensus foreclosure+rescue+services gross+domestic+product race+to+bottom big+banks marx june+jobs+report open+auction lost+decade financial+genocide republican+budget emergency new+capitalist+manifesto bank+fees credit+card minsky tips geithner commercial+real+estate direct+jobs+program civil+disobedience human+capital direct+deposit reaganomics overdraft cfpb galbraith social+security+cards personal+consumption treasuries protests balance etf economic+justice barack+obama worker+ownership wall+street+bailouts exports household+debt fallacy+of+composition gas+prices obama+administration destruction citizens+united outlays unemployment+benefits imports card+act fallacies securities+laws save public+option living+standard unions july+2011