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US Personal Income Dropped 1.8% in 2009 – and the Private Sector Got Creamed

by Brett on August 9, 2010

If your personal income is stagnant, or even declining, you’re not alone in the US.

Personal income declined 1.8% year-over-year in 2009 according to data released from the Commerce Department. The Wall Street Journal reports:

Income declined in 223 metro areas last year, increased in 134 and was unchanged in nine regions. Even though prices declined last year — down 0.2% from a year earlier as measured by the national price index for personal consumption expenditures — incomes fell even more. On average, personal income dropped 1.8% in 2009, following a 2.7% increase in 2007. (Ed. note: I think they meant 2008).

In areas that saw gains, most of the increases came from the government in one way or another. In 77 of the 134 regions that saw incomes increase, the growth came from transfer receipts such as unemployment benefits or Social Security payments. In most of the remaining 57 metro areas, the gains were concentrated in the government sector, the Commerce Department said, including strong growth in military earnings.

The lack of organic growth from the private sector is troubling – and a big reason of why the unemployment numbers stink.  Ironically, I think the only thing that the government can do to right the situation is nothing at all – and we know that’s probably not a politically palatable option.

So, expect private sector wages to softly deflate for the foreseeable future.  Metro areas that are beneficiaries of state and local government spending may soon join them.  Which could leave Washington DC metro area as the last town standing.

Per Capita Income by Metro Area, courtesy of WSJ.com


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