Personal Income and Spending continue to suggest only further weakness. While there is a whole lot of caution necessary when analyzing this data due to its susceptibility to large revisions, there is still only further deceleration on both sides of the consumer. Nominal Disposable Personal Income (DPI) was up just 3.4% year-over-year in September 2016, below the 3.8% average of 2015 and the 3.7% average so far of this year (including September). DPI averaged 5.5% from 2003 to 2007 and 5.7% from 1992 to 2000. What should be truly concerning is that nominal DPI averaged 4.0% during the worst parts of the dot-com recession, October 2001 through September 2002.

This low rate of nominal income growth only adds to the further cost of how the Great “Recession” wasn’t a recession. DPI “should” have been slightly more than $18.4 trillion had the dislocation in 2008 been an actual cyclical disruption. Instead, DPI is only $14.1 trillion in September 2016, a huge disparity that the real economy cannot simply ignore (as economists do).

Real DPI per capita declined in September for the second consecutive month, leaving the year-over-year growth rate at just 1.4%. That is the lowest gain since the end of 2013 when the tax change in 2012 created muddied base effects. 

Despite the drawbacks in the data series (again, tendency toward large revisions), there is widespread indication that the “global turmoil” of last year made a real difference as far as incomes for US workers. All the income series have registered noticeable deceleration, including Real Personal Income excl. Transfer Receipts, data which the NBER considers as one of their four major cyclical inputs. I wrote in August about the situation in those four:

What was a steady growth trend, albeit, as usual, weaker than in past “cycles”, suddenly stopped at the end of last year – an inflection point that isn’t in any way surprising. It did not turn recessionary and immediately drop into contraction, but that isn’t my point with all this. I am not trying to define a recession in 2016, rather I am looking for a consistent and comprehensive view of the economy as it actually is. Using the NBER’s criteria, what we find is highly compelling weakness in three of them stacked against the fourth.