Personal Income Drops Biggest Percentage in 20 Years

, Posted: Fri, March 1 2013 at 5:30 PM, Updated: Fri, March 1 2013 at 6:19 PM

Tough times call for desperate measures.

But in an already tight stripped economy, people are now making even more drastic cuts.

The Commerce Department released new numbers Friday.

Personal income in January went down by more than 500 billion dollars, a 3.6% decrease from December.

That's the biggest cut since January 1993.

So how did personal income appear to drop so much in a month?

The Commerce Department says its because of a combination of one-time events.

Major corporations paid out dividends early at the end of last year to help high income shareholders avoid paying higher taxes.

That boosted their December income, therefore the January numbers appear to be less.

And for average Americans, the payroll tax cut expired at the end of 2012, most workers are paying two percentage points more in taxes now. t

In what appears to be a contradictions there is some good news, U.S. consumer spending rose in January as Americans spent more on services.

And last week

fewer Americans than forecasted filed applications for unemployment benefits.

It won't be until next week until the unemployment numbers for the month are released.

Economists also say that the amount of savings American's currently have hit the lowest level since November 2007.

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