US economic growth is slipping and a new recession may be near. If the current expansion ends at some point in the near future (assuming it’s still alive), the “recovery” in personal income will be the weakest by far among business cycles since 1970.
To put this in perspective, here’s how the current run of personal income (red line in chart below) compares with previous recoveries, based on start dates following the end of NBER-defined recessions. The key takeaway: income growth has been unusually weak. There was a brief period when income spiked, thanks to a hefty wave of government stimulus. But sugar high faded… quickly.
The sluggish bounce for household income during economic expansions stands in stark contrast with the red-hot recoveries in employment, consumer spending and industrial production – all of which have recorded rebounds over the past two years that exceeded their predecessors for the past half century — by wide margins.
The feeble bounce in personal income is a warning sign that the widely cited “resilience of the consumer sector” may be softer and more vulnerable than generally assumed. Manage macro expectations accordingly.
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