Growth in Personal Income Shows Uneven U.S.

Recovery

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Growth in Personal Income Shows Uneven U.S. Recovery
ANALYSIS

Growth in Personal Income Shows

Uneven U.S. Recovery
April 19, 2016
States' Fiscal Health

One of the longest U.S. economic expansions in history has lifted personal income in
all states. But growth has varied, from a constant annual rate of less than 1 percent in
Nevada to more than 5 percent in North Dakota since the start of the Great Recession.
A handful of states, though, lost some gains in the fourth quarter of 2015.
Nationwide, growth in personal income has been slower than normal. Since the
downturn began in the fourth quarter of 2007, estimated U.S. personal income has
increased by a constant annual rate of 1.6 percent through the fourth quarter of 2015,
compared with 2.8 percent over the past 30 years, after accounting for inflation.
States have recovered at different paces. Adjusted for inflation, personal income in 21
states has grown faster than in the nation as a whole since the start of the recession.
Only in mid-2015 did the final stateNevadarecover its personal-income losses
and return to its pre-recession level.
In the latest year of this post-recession expansion, all but six states continued to
make gains. Personal income in the fourth quarter of 2015 fell from a year earlier in
Iowa, Nebraska, North Dakota, Oklahoma, South Dakota, and Wyoming. Despite the
drops, personal income in those states remained higher than before the recession.
Overall, inflation-adjusted personal income grew by 2.9 percent at the close of 2015
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compared with a year earlier, with 17 states outpacing U.S. growth.

Personal income estimates are widely used to track state economic trends. As the
economy expands or shrinks, state personal income also changes. These trends
matter not only for individuals and families but also for state governments, because
tax revenue and spending demands may rise or fall along with residents incomes.
Comprising far more than simply employees wages, the measure counts all sorts of
income received by state residents such as earnings from owning a business or
investing, as well as benefits provided by employers or the government.
Download the data

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Trends in inflation-adjusted personal income since 2007, the onset

of the recession:
North Dakota (5.1 percent) enjoyed the fastest annualized growth since the start
of the recession, measuring by the constant pace it took for personal income to
reach current levels. Next were other leading oil-producing states: Texas (3.0
percent), Alaska (2.6 percent), Oklahoma (2.3 percent), and Colorado (2.2
percent).

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Nevada, where home prices and construction earnings plunged when the
housing bubble burst, had the slowest growth among all states: an annualized
rate of just 0.2 percent since the fourth quarter of 2007.
After Nevada, Illinois (0.6 percent), Maine (0.8 percent), Connecticut (0.8
percent), and Arizona (0.9 percent) had the slowest annualized growth rates for
personal income.

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Trends in personal income for the fourth quarter of 2015, adjusted

for inflation and compared with a year earlier:
The fastest growth rates in the fourth quarter of 2015 relative to a year earlier
were in a cluster of Western states: California (5.1 percent), Oregon (4.1 percent),
Utah (4.1 percent), and Nevada (3.9 percent).
Among the six states with a drop in personal income, North Dakota (-3.7
percent) and Wyoming (-1.2 percent) were hurt primarily by declining earnings in
the mining industry, which includes coal, natural gas, and oil production. Iowa
(-1.4 percent), South Dakota (-0.9 percent), and Nebraska (-0.6 percent) mainly
registered losses in the farm sector, and Oklahoma (-0.3 percent) saw declines
in farming, mining, and manufacturing income.
Although 44 states registered gains, personal income in two grew by less than 1
percent: West Virginia (0.5 percent) and Kansas (0.8 percent). Farm earnings fell
in Kansas, and the mining industry stunted West Virginias growth.
At the end of 2015, nine states saw growth in personal income that the Bureau of
Economic Analysis attributed to bonuses paid when auto workers ratified new
union contracts: Illinois, Indiana, Kansas, Kentucky, Missouri, Michigan, Ohio,
Tennessee, and Texas.
Personal income in 38 states grew faster between the fourth quarters of 2014 and
2015 than its constant pace since the end of 2007, accelerating those states
economic expansions. In 12 statesAlaska, Idaho, Iowa, Kansas, Nebraska, New
Mexico, North Dakota, Oklahoma, South Dakota, Texas, West Virginia, and Wyoming
personal income increased in the past year but at a slower pace than each states
constant growth rate since the recession, moderating their growth trends. North
Dakotathe state with the largest drop in personal income over the past yearstill
enjoyed the greatest growth within the U.S. for inflation-adjusted personal income
since the recessions onset.

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By other measures, states recovery from the recession also is uneven. According to
Pews Fiscal 50 research, 21 states still were collecting less tax revenue, after
adjusting for inflation, in the second quarter of 2015 than at their individual peaks
before or during the recession. Meanwhile, employment measures show that many
states labor markets have yet to completely recover.

Some ups and downs since recession

The constant rate of growth between 2007 and 2015 masks volatility in personal
income that occurred in intervening calendar years. (See the Year by year tab for
annual results in each state between 2007 and 2015. Because year-by-year results
are based on changes in total dollars of personal income from calendar year to
calendar year, those results cannot be compared with growth rates in the 50-state
chart that measure changes in annualized fourth-quarter data from a year-earlier
period.)
Measuring total dollars of personal income received in each calendar year, this
economic gauge fell in every state in 2009. The country rebounded over the next
three years: 49 states personal income rose in 2010Nevada was the outlierand
all states saw increases in 2011 and 2012. In 2013, personal income fell in 39 states,
reflecting a number of taxpayers shifting income to 2012 from 2013 to avoid potential
increases in certain federal tax rates, and the expiration of other tax rates. The
rebound resumed over the next two years, with personal income rising in every state
but Kansas in 2014. For calendar 2015, personal income was higher than in 2014 in all
but three states: Iowa, North Dakota, and South Dakota.

What is personal income?

Personal income tallies residents paychecks, Social Security benefits, employers
contributions to retirement plans and health insurance, income from rent and other
property, and benefits from public assistance programs such as Medicare and
Medicaid, among other items.

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Federal officials use state personal income to determine how to allocate support to
states for certain programs, including funds for Medicaid. State governments use
personal income statistics to project tax revenue, set spending limits, and estimate
the need for public services.
Looking at personal income per capita or state gross domestic product, which measures
the value of all goods and services produced within a states borders, can yield different
insights on state economies.
Download the data to see state-by-state growth rates for personal income from 2007
through the fourth quarter of 2015. Visit The Pew Charitable Trusts interactive
resource, Fiscal 50: State Trends and Analysis, to sort and analyze data for other
indicators of state fiscal health.
Analysis by Alex Boucher, Ruth Mantell, and Jennifer Thornton

Explore Fiscal 50 Interactive

Sort and chart data about key fiscal and economic trends in the 50 states, and read
Pew's insights.
Chart Data, Read Analysis

MEDIA CONTACT

Sarah Leiseca
Officer, Communications
202.540.6369
sleiseca@pewtrusts.org

TOPICS

Fiscal And Economic Policy, State Policy, Governing

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PROJECTS

States' Fiscal Health

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