Real Per-Capita Disposable Personal Income

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The following perspective is excerpted from a speech given by Federal Reserve Governor Donald L. Kohn at the Federal Reserve Bank of Philadelphia's Monetary Seminar in Philadelphia on September 24, 2003. In it he discusses how consumer confidence in the economy is a powerful factor in determining future growth:

"To the extent that the productivity increases of the past few years are resulting from businesses learning how to use existing technologies and capital more effectively and from more intense pressure to realize cost savings, productivity gains in the future may not be as large as those experienced recently. If private agents hold this view, expectations of future income and profits would be damped relative to the outsized productivity gains of late, curtailing the indirect effects of those gains on demand. In addition, the perceptions of households and firms about the growth of future income and profits may be heavily influenced by their recent experience, perhaps even more than by the longer-term trends in productivity and potential output that figure so prominently in our economic models. Just as households and businesses may have extrapolated earlier very rapid, but unsustainable, economic growth, it would not be surprising if the recent economic weakness may have led them to expect smaller increases in output and income than will turn out to be justified by underlying trends. "

http://www.federalreserve.gov/boarddocs/speeches/2003/20030924/default.htm

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The following perspective is excerpted from a August 29, 2003 news release by the Bureau Of Economic Analysis. It enumerates changes in disposable personal income.

Personal income increased $19.4 billion, or 0.2 percent, and disposable personal income (DPI) increased $120.3 billion, or 1.5 percent, in July, according to the Bureau of Economic Analysis. Personal consumption expenditures (PCE) increased $59.7 billion, or 0.8 percent. In June, personal income increased $33.7 billion, or 0.4 percent, DPI increased $30.6 billion, or 0.4 percent, and PCE increased $44.5 billion, or 0.6 percent, based on revised estimates.
The July change in disposable personal income (DPI) -- personal income less personal tax and nontax payments -- was boosted as a result of provisions of the Jobs and Growth Tax Relief Reconciliation Act of 2003, which impacted personal tax and nontax payments. Excluding this special factor, disposable personal income increased $19.0 billion, or 0.2 percent, in July, after increasing $30.6 billion, or 0.4 percent, in June.

http://www.bea.doc.gov/bea/newsrel/pinewsrelease.htm

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The following perspective is excerpted from a speech given by Federal Reserve Governor Mark W. Olson given at the School Of Business And Industry at Florida A & M University in Tallahassee on March 26, 2002. It describes how disposable personal income levels can be elevated by means other than salary increases.

"Businesses are looking for employees capable of expanding markets for their products and services or of developing innovative ways to reduce costs. They want to measure what their workers contribute to the value of the firm, and they are increasingly willing to reward their workers according to these contributions. Thus, as I noted above, firms have made their pay systems much more flexible and now routinely use merit-pay systems that base salary increases and promotions on performance. In addition, firms have increased their use of variable pay or have raised the potential value of bonus systems already in place. The most striking example of the expanded use of variable pay has been the sharp rise in stock-option grants in recent years. According to one survey, the number of U.S. corporations with employee stock ownership plans rose from just 200 in 1974 to roughly 10,000 in 1998. More important, these stock options are no longer limited to the top executives in a company. According to a recent KPMG survey of 133 companies, 72 percent of middle managers, 35 percent of all union-exempt employees, and 12 percent of nonexempt employees were eligible to receive stock option awards. Of course, as those whose options fell out of the money well know, stock options do not automatically translate into higher income. But for many, stock options paid off handsomely during the late 1990s. More than 50 percent of adults in the United States now participate in some form of stock ownership in large part because of participation in either stock option programs or retirement plans that invest in stocks."

http://www.federalreserve.gov/boarddocs/speeches/2002/20020326/default.htm