Good News: Income Now Growing Faster Than Spending

By Derek Thompson

Americans' income grew faster than spending in April. We're earning more, we're saving more and we're spending the same. Good news for long-term recovery trends, because you don't want a debt-fueled recovery coming out of debt-powered recession. Bad news in the short-term since consumption accounts for about two-thirds of GDP, by many measures. When consumption stalls, the economy stalls.

But basically, this is cause for joy. Rising income means rising consumer confidence, which sets the stage for more private spending, and less private spending, in the future.

Another interesting note for politicos is that when incomes rise, incumbents have a better shot at keeping their jobs. The relationship between growth in real disposable income and House seat losses is statistically significant -- much more so than unemployment. Most presidents lose House seats during midterms, but high income growth mitigate those losses, dramatically.

This article available online at:

http://www.theatlantic.com/business/archive/2010/05/good-news-income-now-growing-faster-than-spending/57397/