U.S. income up .5% -- World's largest economy slowing

September 6, 2006

The U.S. Labor Department reported that August average hourly earnings increased 3.9% in the past year. Unfortunately, prices increased 3.4% during that time, so the real earnings increase was only .5%.

During the same time period, the unemployment rate declined to 4.7% from 4.9%. However, part of this decline is because a larger number of potential workers left the labor force because they couldn’t find jobs. The number of discouraged workers increased to 448,000 from 384,000 a year earlier.

What It Means:
Rising prices are eating up most of your salary gains, and jobs are harder to get. The decline in the housing industry is only starting to be felt in the economy. This means the economy could slow further before it gets better. Things should stabilize by the second half of next year, but it could get a little choppy between now and then.

Action Steps:
Hope for the best, but plan for the worst. Make sure your financial house is in order. See if you can postpone any large purchases for at least a year. Make sure you have at least six months of income in a money market account. Develop a plan to pay off any outstanding credit card debt.

Source: U.S. Labor Dept. web site, U.S. Commerce Dept. web site