September 2010 was unexpectedly less robust for U.S. consumers, as personal incomes fell, surprising economists, $16.8 billion, or -0.1%. Disposable income decreased even more; $20.3 billion, or -0.2%. At the same time, and despite this fall in income, personal consumption expenditures (a.k.a. consumer spending) increased only $17.2 billion, or 0.2% -- far lower than economists expected. A Bloomberg survey of 67 economists yielded an average expectation of a spending increase of double that -- 0.4%.
The wonky thing this means is that inflation is not rising as much as the Fed and economists want it to, increasing the likelihood that the Federal Reserve will pump more money into the economy -- by lowering short-term interest rates for banks yet again -- when they meet later this week. The practical meaning is that the economy is doing more poorly than everyone thinks, especially for the consumer. As our national debate peaks Tuesday, Nov. 2, Election Day, with a firestorm of a campaign season that's largely been about the economy, and how the gap between the richest 2% and the faltering middle class is growing ever larger, it's proof that things are even worse than we're saying.
It's likely this news will be ignored in momentum of election news, and that's too bad, as it shines a light on what's really going on here: though the "job creators" should have already counted on the Republicans winning more seats than the Democrats do, and done some job creating with the vast wealth they'll get to keep. Instead, they cut wages or cut back on hours, held off on hiring, decided not to create a new position or fill an empty one, or some combination of these things.
The economy is simply in a prolonged doldrum. And as a a number of interviews with economists on NPR indicate, the general agreement is that the policies favored by the Democrats will do what everyone wants: decrease the deficit and help the middle and lower classes stay employed so that they can spend money, once again stimulating the economy.
Whether any voters will be influenced by this is a long shot; and what's actually going on with the economy is obviously a mystery to everyone. I know, just like you do, though: when my income rises, I spend more. When it falls, I spend less. And we're going to keep doing that as long as we fear our politicians care way more about the rich folks, and the heads of corporations, than they do about us.