Hurricane Sandy is largely to blame for lower wages and salaries in October, according to data released today by the Commerce Department.
Wages and salaries dipped 0.2 percent in October according to data released today by the U.S. Department of Commerce, which attributes the decline largely to disruptions caused by Hurricane Sandy.
After adjusting for inflation, disposable income fell 0.1 percent in October and spending dipped by 0.3 percent, the largest decline since September 2009, according to the Commerce Department. The personal savings rate notched up to 3.4 percent in October compared to 3.3 percent in September.
The October figures reflect the effects of Hurricane Sandy, which caused damage in 24 states, particularly New York and New Jersey, according to a Commerce Department statement. Storm-related work interruptions reduced wages and salaries by an annual rate of more than $18 billion.
Stagnant wages are a key headwind for holiday shoppers and home buyers this year, according to analysts for the retail and consumer sectors. Retailers yesterday reported disappointing sales results for November, which were 1.7 percent higher than November 2011. That’s well below the 4.5 percent to 5.5 percent gain anticipated by the International Council of Shopping Centers, which blamed the trend on the Superstorm Sandy.
Sandy is not entirely blame for lackluster spending, according to the results of a Millionaire Corner survey conducted in September, which indicated investors overall planned to spend less on holiday gifts this year compared to last. Roughly 71 percent planned to spend the same as last year, while 14 percent indicated they would spend more and 15 percent said they would spend less. The top reason cited for cutting back on holiday spending – a factor cited by 53 percent of survey participants - was “I have less disposable income.”
Lack of confidence was another key inhibitor of spending. More than one-third of participants (34 percent) indicated they believed the economy was getting worse, and 27 percent said they were worried about their financial position.
October’s declines follow a 0.3 percent increase in wages and salaries, and a 0.4 percent in real consumer spending for in September 2012, the Commerce Department reports.