Personal income drops in September, PCE inflation benign

Personal income dropped 0.1% in September after a 0.4% increase in August. Private sector wages and salaries grew a modest 0.1%, while government wages decreased 0.4%.  Personal spending grew 0.2% while PCE inflation grew at a modest 0.1%. 

The sharp drop in gov`t wages was actually significantly influenced by a sharp drop in government unemployment insurance benefits. Yes, unemployment benefits are actually considered government wages.  It also reflects cuts at the state and local levels.  The private sector wage weakness was led by a decline in the goods-producing sector (i.e. manufacturing) after a surge in August.

Clearly, the consumer sector decelerated in August but part-emphasis on part-of the slowing may be related to coming off strong numbers in August. But without a doubt, the government sector is a negative in terms of wages and unemployment benefits.


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