Personal income barely rose in September but was comfortably higher from one year ago. Consumer spending is therefore rising. The economy is in a reasonably good shape as it goes into a cycle of rising income leading to more spending which in turn is leading to job creations and a further rise in income.
Specifically, personal income grew 0.1 percent in September and is up by 4.1 percent from one year ago. Income generated from rents grew better at 7 percent. Farm income is recovering after a big tumble last year. Income from unemployment checks are falling rapidly indicating fewer people on the dole.
While the total income of everyone combined grew by 4.1 percent, personal consumption grew by a tad less of 3.4 percent. Savings rate is therefore modestly higher, which is helping improve overall balance sheet of families. Based on the latest income and spending patterns and the shift in momentum, GDP in the fourth quarter should be better than the disappointing third quarter performance. No recession over the horizon. Therefore, more jobs will lead to more real estate activity in upcoming quarters.
Per person basis and after taxes, the disposable income of a typical person in the U.S. is $41,850, which is a gain of 2.8 percent from a year ago.
As an aside, rising income naturally means more consumption. Interestingly, the language company Rosetta Stone is trying to persuade people to buy not things and stuff but to buy a foreign language as something more lasting and impressive. Despite some concern about an increase use of Spanish language in America, globally the biggest growth is in the English language as this language has in essence become the passport to the world. The real rosetta stone is displayed in the British Museum even though Napoleon and his scientists had discovered it in Egypt. Admiral Nelson simply took it from Napoleon after winning a sea battle.
Lawrence Yun is Chief Economist and Senior Vice President of Research at NAR. He directs research activity for the association and regularly provides commentary on real estate market trends for its 1 million REALTOR® members.