Tuesday, March 02, 2010

Real Personal Income less Transfer Payments

by Bill McBride on 3/02/2010 12:58:00 PM

The National Bureau of Economic Research (NBER) uses several measures to determine if the economy is in recession. From the most recent NBER memo:

Because a recession is a broad contraction of the economy, not confined to one sector, the committee emphasizes economy-wide measures of economic activity. The committee believes that domestic production and employment are the primary conceptual measures of economic activity.

The committee views the payroll employment measure, which is based on a large survey of employers, as the most reliable comprehensive estimate of employment. ...

The committee believes that the two most reliable comprehensive estimates of aggregate domestic production are normally the quarterly estimate of real Gross Domestic Product and the quarterly estimate of real Gross Domestic Income, both produced by the Bureau of Economic Analysis. ...

Other series considered by the committee [include] real personal income less transfer payments, real manufacturing and wholesale-retail trade sales, industrial production, and employment estimates based on the household survey ...
Following recent recessions, the two key measures the NBER uses - GDP and payroll employment - have given different end dates for the recession. GDP started increasing in Q3 2009, and payroll employment is still declining.

The NBER also uses other measures like industrial production (that bottomed in June 2009) and retail sales (that bottomed - so far - in late spring 2009).

Another measure that I rarely mention is real personal income less transfer payments from the monthly BEA Personal Income and Outlays report. This declined in January to $9,021 billion (SAAR) from $9,042 billion in December, but is still above the low of September 2009 ($9,000 billion).

non-business bankruptcy filings Click on graph for larger image in new window.

This graph shows real personal income less transfer payments since 1969.

This measure of economic activity is moving sideways - similar to what happened following the 2001 recession.

Just another indicator to watch ... and this could easily move below the Sept 2009 low in February.