Skip to content Skip to footer
Americans’ Income and Spending Drop, Despite Stimulus
Household disposable income stagnated in September

Americans’ Income and Spending Drop, Despite Stimulus

Household disposable income stagnated in September

Household disposable income stagnated in September,
and spending fell 0.5 percent, the government reported. The figures call into
question the strength of the economic recovery.

American households cut spending and saw income stagnate in September, despite
a massive government stimulus program propping up their bank accounts.

Personal disposable income decreased 0.1 percent, after adjusting for inflation,
the Commerce Department reported Friday. Personal spending fell 0.5 percent, after
four months of gains.

The hit to household bank accounts would have been worse without the massive federal
stimulus program designed to prop up economic activity. The nation’s inflation-adjusted
personal income has been sloping downward during 2009, when government transfer
payments are subtracted out. But including the transfer payments – which
have risen because of the stimulus efforts since February – total personal
income is about where it stood early in the year.

“Households are depending on transfer payments from the government just
to stay even,” economists at the investment firm Goldman Sachs wrote in
an analysis of the report. “While the downward momentum [in wages] has
abated, it has not turned positive. Meanwhile, income on assets – interest
and dividends – continues to drop.”

The report raises questions about the strength of the economic recovery that economists
believe is now beginning.

Incomes have fallen for many Americans because of unemployment, while others have
seen pay raises vanish. In this tough climate, consumers remain reluctant to spend.
The end of one government stimulus program – the “cash for clunkers”
incentive to buy a car – contributed to the overall weakness in consumer

The concern about consumers helped push stock prices down Friday in morning trading.
The news also came as the Obama administration released an estimate that its $787
billion stimulus program has saved or created 650,000 jobs. Critics say the stimulus
so far failed to create genuine job growth in the economy.

Many of the stimulus provisions have bolstered disposable incomes, however. Americans
are paying less in taxes because of the stimulus, and they are getting more money
from programs like Social Security and unemployment insurance.

“Only an increase in government transfer payments prevented an overall
decline in incomes,” says economist Nigel Gault of IHS Global Insight,
in a written report Friday. “Consumer spending will probably continue to
grow, but at a more subdued pace” than the 2.6 percent annual rate seen
from June to September.

To some extent, transfer programs naturally go up during recessions, and people
naturally pay less in taxes. That’s because of programs linked to economic
hardship, such as unemployment insurance, and because a recession drags down taxable
income for people who lose jobs or who have stock-market investments. But the
stimulus measures this year have added greatly to that typical pattern.

​​Not everyone can pay for the news. But if you can, we need your support.

Truthout is widely read among people with lower ­incomes and among young people who are mired in debt. Our site is read at public libraries, among people without internet access of their own. People print out our articles and send them to family members in prison — we receive letters from behind bars regularly thanking us for our coverage. Our stories are emailed and shared around communities, sparking grassroots mobilization.

We’re committed to keeping all Truthout articles free and available to the public. But in order to do that, we need those who can afford to contribute to our work to do so.

We’ll never require you to give, but we can ask you from the bottom of our hearts: Will you donate what you can, so we can continue providing journalism in the service of justice and truth?