Data

Aug Personal Income rose .2%, .1% more than expected and July was revised up by .2%. Spending rose 1.3%, .2% higher than forecasted and most of the gain in the durable goods category was due to the Clunker program. Durable goods purchases, which reflect auto’s, rose 5.3% vs a 1.3% gain in July. The headline PCE inflation deflator rose .3% m/o/m, thus REAL spending rose 1% while REAL income fell .1%. The core PCE rose .1% m/o/m. Due to the one time spending boost relative to a modest gain in income, the savings rate fell to 3% from 4%. Now with the CARS program over, we can now better measure what the real demand is for goods and the data should be more useful in analyzing in the months ahead. The unwelcome backdrop though is that REAL income growth is still flat lining at best and its savings and income growth that will drive spending looking forward as the access to credit will remain crimped.

Initial Jobless Claims totaled 551k, 16k more than expected and up from a revised 534k last week (up by 4k). The 4 week average fell to 548k from 554k. Continuing Claims fell by 70k and were 80k below expectations BUT those receiving Emergency Unemployment Compensation rose by 100k and those getting Extended Benefits rose by almost 5k. Thus, those that are falling off the continuing claims roll after 26 weeks have been more likely getting extended benefits past it than finding new jobs. The insured unemployment rate was unchanged at 4.6%. Following yesterday’s ADP report showing private sector job losses of 254k, tomorrow’s Payroll figure is expected to show non farm job losses of 175k. There is no question there is a continued slowdown in the pace of firings but businesses remain reluctant to hire.

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