Friday’s Commerce Department report shows that personal income indicator has declined for three consecutive months — at a 2% annual rate. In the past, such steep drops in that category have been followed, three-quarters of the time, by a recession, according to Mr. Rosenberg’s [David Rosenberg of Gluskin Sheff & Associates Inc.] research. So while consumers boosted spending in the third quarter, they pulled it off by dipping into their savings and spending government dollars, not by earning more money at work. Mr. Rosenberg says stagnant wages, plunging consumer confidence, and low expectations for wage growth are a recipe for a dramatic drop in consumer spending in coming months.
via Income Excluding Government Transfers Drops Again – Real Time Economics – WSJ.