by Raymond J. Keating
The latest personal income report from U.S. Bureau of Economic Analysis showed solid growth in November.
Personal income grew by 0.5 percent in November, which was a nice step up from the 0.1 growth rate in October.
Even more important was the growth in real per capita disposable income (i.e., income after current taxes adjusted for inflation and population). After declining in October, real per capita disposable income resumed its growth in November. As noted in the following chart, real per capita disposable income has been on a solid growth path since the middle of 2016.
Source: Federal Reserve Bank of St. Louis, FRED
In the end, since disposable income is the source for individuals’ consuming, investing and saving, it’s growth is critical for the economy and for business well-being. Indeed, the extended period of growth in real per capita disposable income stands out as a key source of economic growth.
Given this reality, looking ahead, the economy would benefit from making all parts of the 2017 tax relief package permanent, and expanding tax relief, especially in terms of reducing personal income and capital gains tax rates.
Raymond J. Keating is chief economist for the Small Business & Entrepreneurship Council.