Personal income up in April

Personal income rises for six straight months, a sign recovery is back on track.

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    Gregg Gordon (right) of Hyatt talks with Paul Munoz of Harrison, N.J., about job opportunities at Hyatt during a New York job fair in May. With more Americans finding jobs, US personal income is starting to inch up consistently.
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Americans' personal income looks like its back on track – not the fast track, perhaps, but the right track after the ravages of the worst recession in decades.

In normal times, income grows month after month as more people find jobs and workers get pay raises. The recession interrupted that flow with stretches of declines as people lost their jobs. Since November, however, the trend has turned steadily upward.

In April, total personal income grew 0.4 percent over the March total, its biggest monthly rise since May 2009 and the sixth straight monthly increase, the Commerce Department reported Friday. Disposal income, which is personal income minus taxes, grew for the ninth month in a row and now stands at its second-highest total ever.

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Economists called the report weak because the rise in income didn't translate into a boost for spending. Americans spent only $4 billion more in April than they did in March, less than a 0.1 percent increase. Consumer spending is key because it powers most of the growth of the US economy.

"The flat April indicates that second quarter spending will not rise so fast – probably closer to 3 percent – but that the saving rate will stabilize as income growth improves," writes Nigel Gault, an economist at IHS Global Insight in Lexington, Mass., in an analysis.

But in the longer term, a healthy, consistent rise in income would mean that Americans can save more even as they spend more. That's a far better prospect than having to save more by cutting back on spending.

"It is becoming increasingly likely that more of that [savings] adjustment will be achieved via faster income growth rather than slower spending growth," notes Paul Dales, an economist at Capital Economics in Toronto, in a written analysis.

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