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Personal income advances
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March 2, 1998: 9:14 a.m. ET
Income up 0.6 percent in January as spending increases 0.4 percent
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NEW YORK (CNNfn) - Americans' personal income increased during January and consumers took advantage of the gain to spend and save a little more than expected, the U.S. Commerce Department said Monday.
Personal income rose 0.6 percent in the month to a seasonally adjusted annual rate of $7.093 trillion, a little weaker than economists' predictions of a 0.8 percent rise.
However, personal spending rose 0.4 percent to a seasonally adjusted annual rate of $5.63 trillion, pushing ahead of forecasts for a 0.3 percent gain, according to the federal economic figures.
Additionally, Americans were socking away money at a rate not seen since last summer. The U.S. savings rate rose to 4.2 percent in January, the highest since June 1997. In December, the rate was 3.9 percent.
Commerce attributed some of the January income gains to cost of living increases in Social Security and raises for federal government employees. When those increases are taken out of the equation, incomes rose 0.5 percent for the month.
Wages and salaries, the most closely watched part of the income figures, rose 0.7 percent.
Ken Goldstein, an economist at the Conference Board, said the figures underscore what has become a strong trend known as "the virtuous cycle." Under that model, surging job growth makes employers pay more to retain employees. Those workers then go out and spend the additional money, creating more jobs to support the increased demand.
"It's been going on for two years and it's not changing at all. It tells us that [the cycle] continues to generate strong income growth and strong job growth."
Goldstein predicted that the trend of strong wages and job growth will continue for at least the first half of 1998.
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