Pay Rises, But Workers Don't Spend - Spokane, North Idaho News & Weather KHQ.com

Pay Rises, But Workers Don't Spend

MSNBC.COM - American consumers caught a break in their paychecks in December – and the money went right into their saving accounts.

That could help ease the recent squeeze on household finances. But it's not at all clear whether the trend will continue.

Personal income rose by 0.5 percent in December, after edging up just 0.1 percent in November, according to the Commerce Department. For months, wage gains have been meager, forcing consumers to lean more heavily on their credit cards to pay the bills. The income bump last month could help spur a bigger pickup in consumer spending, which would help keep the economic recovery on track.

"We need worker compensation to pick up if consumption is to rise," said Joel Naroff, chief economist at Naroff Economic Advisors, "and that may finally be happening."

Household budgets got some additional relief on prices, which edged up just 0.1 percent in December after holding steady in the prior two months. A decline in gas prices helped offset price rises elsewhere as energy prices fell 1.3 percent. For all of 2011, the Commerce Department's price gauge rose 2.4 percent. (The government's best-known inflation tracker, the Consumer Price Index, rose 3 percent in 2011, double the increase in 2010.)

But even as their spending power increased in December, consumers took the extra wages and stashed them in their savings accounts, leaving consumer spending flat for the month. The savings rate rose to 4 percent, the highest reading since August. click here to read the full story

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