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American incomes rise 0.3%

Jeremy Hobson Mar 1, 2012

Jeremy Hobson: Also this morning, the Commerce Department said our incomes were up three-tenths of a percent in January.

Here to talk about that with us is Gus Faucher. He’s senior macroeconomist with PNC Financial, and he’s with us live from Philadelphia. Good morning.

Gus Faucher: Good morning.

Hobson: So Gus, we’re making a little bit more money.

Faucher: That’s right. We’re seeing both job gains, more people working; and we’re also seeing wage growth, people being paid more who have jobs. So together, those are contributing to income gains that we’re seeing.

Hobson: How big of a deal is three-tenths of a percent in a month?

Faucher: Well, you know, that average is about 3.5 or 4 percent over a year, so that’s OK. It’s not great, particularly if inflation is running at around 2 percent. So real growth there is about 2 percent, which is, again, OK, but certainly we’d like to see something stronger than that — more job growth and then stronger wage gains as well.

Hobson: You mentioned price inflation — I mean, you don’t have go far here in Los Angeles to find gas almost at $5 a gallon; prices are going up. How much of that money are we just going to throw right back into rising costs of things?

Faucher: Well there’s no question that higher gasoline prices are going to be a hit on budgets. But there are some advantages we’ve been seeing: natural gas prices are way down; it’s been a warm winter throughout the U.S. so that’s reduced home heating costs, so we’ve seen some relief there. But it is going to be the case that inflation and higher energy prices in particular are going to take a hit out of some of those wage gains.

Hobson: Gus Faucher, senior macroeconomist with PNC financial, thanks so much.

Faucher: Thank you.

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