In each Economic Update, the Research staff analyzes recently released economic indicators and addresses what these indicators mean for REALTORS® and their clients. Today’s update discusses personal income data.

• Personal income increased 0.4% in March while personal consumption rose 0.3%. The savings rate, therefore, inched up a notch to 3.8 percent. That is, on average, people spent $962 for every $1000 of take-home pay. During the housing boom years, people did not save and spent just about all of their income.
• Income is recovering. Both wages and salaries are up in the aggregate as 3.5 million additional people are working now versus three years ago. Rental income has been rising robustly. Also, income to small business entrepreneurs, which always undergoes a big swing over a business cycle, is coming back as well. The income going to the unemployed as jobless benefits has been falling, though it is still at double the normal levels.
• Income trends point to continued economic expansion, albeit at a slower than desired pace. Combining income with corporate profits assures that there is no fresh recession in sight for the remainder of this year.
• A possible train wreck is possible in early 2013. Much higher taxes and sharp sequestered cuts to defense and discretionary government spending cuts are on tap at the start of 2013 – if Congress and the White House cannot pass a new budget. GDP could contract by 3% from these new impending laws. Most political analysts, however, believe some compromise will be made to agree on a new budget this year. Under the assumption of a compromise, GDP will likely grow by 2.5% in 2012 and by close to 3% in 2013.