Americans’ income rose sharply in January, driven by social security and dividend payments, in the latest sign that American households remain financially healthy. 

The value of all income rose a full 1 percent last month over December, more than double economists’ estimates and the highest number reported since the summer of 2021, according to a Thursday release from the Bureau of Economic Analysis. Dividend income rose more than 4 percent, owing to strong corporate profits. Social security payments were adjusted for inflation at the beginning of the year, driving a rise in income from transfer payments. 

The big leap forward in overall income is a welcome surprise, but shows the largest gains primarily among the wealthy and retirees. Economists say the eye-popping surge overshadows more moderate but steady growth observed in labor market compensation, necessary to keep the economy strong while the Fed tries to control prices. 

“Everything that we’re looking at would lead us to think that the labor market continues to perform pretty well,” said Jay Bryson, chief economist at Wells Fargo. 

The Fed’s preferred measure of annual inflation last month was 2.4 percent — its lowest since early 2021— but monthly metrics showed a moderate increase in January. Economists said the rise could be due to one-off factors and may not represent a true upswing in prices. 

“The trend is still down on inflation, but if we see a few more months at this pace, basically the inflation won’t be able to hit the goal that we want,” said Stephen Gallagher, chief U.S. economist for the French financial firm Société Générale. 

Other labor market metrics this month have also been strong. The number of people newly claiming unemployment benefits last month, released Thursday by the Department of Labor, was higher than expected, but still at a low level, underlining solid economic growth. The economy added 353,000 jobs last month, according to a Feb 4 release by the department.

Consumers did not match their income growth with a growth in personal spending. After robust holiday shopping in December, spending on goods dropped 1.2 percent, buoyed only by a jump in services spending. 

The increase in consumer spending last month was relatively small and economists don’t expect it to rise as much as income has.  

Americans have been saving less and less of their disposable income in recent months. Households saved only 3.8 percent of their disposable income in January, a number some economists said they would like to see at least doubled. 

But the low savings rate may reflect some positive developments happening in the economy. Wealth has increased since the pandemic, and consumers see the values of their homes and stocks increase, they may not feel the same impetus to save. Because they have faith in a strong job market, households may not see rainy days worth saving for on the horizon. 

“They just see no reason to save currently,” Stan Shipley, managing director of Evercore International Strategy and Investment, said of American households. “If stock market gains slow and as they spend down the pandemic payments that they got, then the savings rate must go on to sustain long term economic viability.”