The careful reader should be puzzled by the above graph: Both lines have the same title, real disposable personal income per capita, and yet they look very different. The extra careful reader will notice one series has a yearly frequency and the other has a monthly frequency. Here, frequency matters a lot, but not because of the usual concerns about seasonality. Income climbs steeply at the end of 2012 before falling dramatically in January 2013. This has to do with the so-called fiscal cliff: A series of temporary income tax cuts were set to expire on December 31, 2012, increasing the tax rate on personal income for many people in potentially significant ways. This event was well advertised. And, although Congress approved last-minute legislation with much smaller tax increases, taxpayers adjusted their various income streams by trying to shift income from the beginning of 2013 to the end of 2012. This shift applies primarily to capital income. When you look at the data at a yearly frequency, all this intrigue mostly washes out.
If you’re wondering how monthly income could be that high, consider this: All the data are annualized, meaning that monthly data are multiplied by twelve, as quarterly data are multiplied by four.
How this graph was created: Search for “real disposable personal income” and these series should appear. Select the monthly and yearly per capita series and click on “Add to Graph.” (FYI: There’s also a quarterly series.) Limit the graph sample to the past five years.
Suggested by Christian Zimmermann.
View on FRED, series used in this post: