American Wallets Get Fatter By Andrew L. Jaffee, May 28, 2004	Home   Search   Forum   Terms

The good economic news just keeps coming and coming, thanks to President Bush's tax cuts. Today the Commerce Department's Bureau of Economic Analysis reported that Americans’ personal income increased 0.6% in April, compared to a 0.4% increase in March, 0.5% in February, and 0.5% in January. Personal income is defined as:

Current income received by persons from all sources minus their personal contributions for social insurance. Classified as “persons” are individuals (including owners of unincorporated firms), nonprofit institutions serving individuals, private trust funds, and private noninsured welfare funds. Personal income includes transfers (payments not resulting from current production) from government and business such as social security benefits and military pensions but excludes transfers among persons.

Not coincidentally, consumer spending rose 0.3% in April compared with an increase of 0.5% in March. Spending by American consumers makes up 2/3 of our nation’s economy. Translation: Americans are finding work and making more money.

Jobless recovery? 288,000 new jobs were created in the U.S. in April, while 337,000 jobs were created in March. That makes for 8 months straight of positive job growth. U.S. gross domestic product (GDP) grew at an annual rate of 4.2% during the first three months of 2004. GDP was revised upward to 4.4% yesterday. U.S. manufacturing activity is very strong.

Some are worried that all this good economic news will cause inflation to once again rear its ugly head. They fear that the Federal Reserve will raise interest rates to tighten the money supply, increase borrowing costs, and thus slow economic growth. But according to CNN.com:

The good news for investors in Friday's economic data came in the price index that was part of the consumer spending and personal income report.

The measure of prices paid by consumers showed only a 0.1 percent rise compared with a 0.3 percent rise in March. Excluding volatile food and energy prices the index also showed a 0.1 percent increase, compared to a 0.2 percent gain in that measure in March.

High oil prices may temper the Fed. But oil prices are off their highs and OPEC and non-OPEC members are already considering increasing production. We’re in for a long, steady period of good economic times.