DANIEL INDIVIGLIO -
American workers got a paltry raise in March. The headlines will tell you: personal income increased 0.5% last month. After all, that's what the Bureau of Economic Analysis reports. But is the news really as good as it looks? Digging deeper shows that the income growth wasn't so spectacular.
First, here's the historical chart for the change in income, disposable income, and spending:
March marks the sixth straight month incomes have risen. Spending rose by 0.6% last month, a little less of an increase than the 0.9% jump in February. Since September you can kind of see these lines move up together in a somewhat linear fashion. That appears to be a nice trend, since more income and spending should help to feed the recovery
But looking deeper into March's numbers reveals that the 0.5% income jump wasn't as good as it looks. Income increased at an annualized rate of $67 billion. Of that, $25 billion consisted of government handouts, in the form transfer payments such as Social Security and unemployment benefits. So the government accounted for more than one-third of the growth in personal income last month. That's the biggest boost transfer payments have provided since August.
To make matters even worse, if you take inflation into account, disposable income barely increased at all. Using chained 2005 dollars, disposable income rose by just 0.1% in March, after flat growth in February. Here's a chart comparing disposable income with and without inflation:
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http://www.theatlantic.com/business/archive/2011/04/did-americans-income-really-rise-in-march/238042/