State personal income: third quarter of 2006
PERSONAL income growth accelerated in all regions of the United States in the third quarter, with growth in the Far West and Mideast regions accelerating the most, according to preliminary estimates released by the Bureau of Economic Analysis (BEA). Growth in all regions exceeded inflation. The national price index for personal consumption expenditures rose 0.6 percent in the third quarter, compared with 1.0 percent in the second quarter.
For the United States, personal income grew 1.4 percent, following a 0.8-percent gain. (1)
The Southwest region grew 1.6 percent, making it the fastest growing of the eight BEA regions in the third quarter. It has been the fastest growing region in five of the last seven quarters. Since the fourth quarter of 2005, the Southwest region has grown almost 5 percentage points faster than the Nation. The Far West grew 1.5 percent in the third quarter. The Great Lakes, Plains, Southeast, and Rocky Mountain regions each grew 1.4 percent. The Mideast region grew 1.3 percent, and the New England region grew 1.1 percent (chart 1).
[ILLUSTRATION OMITTED]
State growth and earnings
In the third quarter, the economies of seven of the fastest growing states--Arizona, Louisiana, Nevada, New Mexico, Texas, Utah, and Wyoming--supported continued earnings growth in the construction sector. However, in almost all other states, construction earnings declined. The largest decline was in Washington, DC, because of an unusually large lump-sum payment in the second quarter. Earnings typically account for the majority of personal income. (2)
In four of the fastest growing states--Louisiana, New Mexico, Texas, and Wyoming--large contributions to earnings growth were made by mining (including oil and gas extraction), a small industry that has expanded rapidly in the past 4 years (table A).
Mining also made a relatively large contribution to third-quarter earnings growth in Oklahoma, Alaska, and West Virginia.
Personal income growth in the state of Washington (2.6 percent) was the fastest. The growth reflected huge gains from the exercise of stock options by employees in the information industry. The gains are counted as part of earnings, which grew 47 percent in the information industry in the third quarter. The exercise of stock options in this industry has frequently propelled Washington to first place in the growth rankings and then dropped the state into last place the following quarter.
Louisiana's personal income growth (1.7 percent) exceeded national growth, the first time this year that its recovery from Hurricane Katrina had such a strong effect. The recovery shows up more clearly in earnings, which have grown twice as fast in Louisiana as in the United States over the last 6 months. The strong earnings rebound was offset by weak transfer receipts as disaster assistance and unemployment compensation tapered off.
Michigan's personal income growth (1.5 percent) reflected strong growth in earnings in durable-goods manufacturing. In fact, the state accounted for almost half of the national gain in earnings in durable-goods manufacturing, $1.2 billion out of $2.6 billion, despite a job loss of 3.1 percent. The opposite movements in earnings and jobs primarily reflected the GM and Delphi employee buyouts.
The employee buyouts were also apparent in the earnings of other Great Lakes states, such as Indiana and Ohio, and in Louisiana and Delaware. Excluding the buyouts, earnings growth in the durable-goods industry was anemic across the country.
Property income and transfers
Property income (dividends, interest, and rent) grew 2.3 percent in the third quarter, compared with 2.4-percent growth in the second quarter. Rental income of persons grew 2.9 percent in the third quarter; in the second quarter, it had fallen to its lowest level since the early 1990s (excluding the third quarter of 2005, which was abnormal because of Hurricane Katrina).
Transfers grew 1.8 percent after growing 1.2 percent in the second quarter. The incorporation of new 2006 data for the Alaska Permanent Fund benefits, a component of personal current transfer receipts, raised Alaska's transfer growth rate to 7.4 percent in the first quarter, compared with the previously estimated 2.8-percent growth rate.
Revised second-quarter growth
Revised second-quarter data revealed weaker personal income growth, particularly in two regions. Growth in the Mideast was revised to 0.5 percent from 1.7 percent, reflecting declines in Delaware and New York, and growth in New England was revised to 0.7 percent from 1.7 percent, reflecting declines in Connecticut and Vermont. The slower second-quarter growth rates stemmed from declining earnings in the finance industry mainly because of unusually large wage payments in the first quarter.
(1.) Personal income is the income received by all persons from all sources; it is defined as the sum of net earnings by place of residence, rental income of persons, personal dividend income, personal interest income, and personal current transfer receipts. Personal income for the Nation is the sum of personal income estimates for all states and the District of Columbia.
For the United States, personal income grew 1.4 percent, following a 0.8-percent gain. (1)
The Southwest region grew 1.6 percent, making it the fastest growing of the eight BEA regions in the third quarter. It has been the fastest growing region in five of the last seven quarters. Since the fourth quarter of 2005, the Southwest region has grown almost 5 percentage points faster than the Nation. The Far West grew 1.5 percent in the third quarter. The Great Lakes, Plains, Southeast, and Rocky Mountain regions each grew 1.4 percent. The Mideast region grew 1.3 percent, and the New England region grew 1.1 percent (chart 1).
[ILLUSTRATION OMITTED]
State growth and earnings
In the third quarter, the economies of seven of the fastest growing states--Arizona, Louisiana, Nevada, New Mexico, Texas, Utah, and Wyoming--supported continued earnings growth in the construction sector. However, in almost all other states, construction earnings declined. The largest decline was in Washington, DC, because of an unusually large lump-sum payment in the second quarter. Earnings typically account for the majority of personal income. (2)
In four of the fastest growing states--Louisiana, New Mexico, Texas, and Wyoming--large contributions to earnings growth were made by mining (including oil and gas extraction), a small industry that has expanded rapidly in the past 4 years (table A).
Mining also made a relatively large contribution to third-quarter earnings growth in Oklahoma, Alaska, and West Virginia.
Personal income growth in the state of Washington (2.6 percent) was the fastest. The growth reflected huge gains from the exercise of stock options by employees in the information industry. The gains are counted as part of earnings, which grew 47 percent in the information industry in the third quarter. The exercise of stock options in this industry has frequently propelled Washington to first place in the growth rankings and then dropped the state into last place the following quarter.
Louisiana's personal income growth (1.7 percent) exceeded national growth, the first time this year that its recovery from Hurricane Katrina had such a strong effect. The recovery shows up more clearly in earnings, which have grown twice as fast in Louisiana as in the United States over the last 6 months. The strong earnings rebound was offset by weak transfer receipts as disaster assistance and unemployment compensation tapered off.
Michigan's personal income growth (1.5 percent) reflected strong growth in earnings in durable-goods manufacturing. In fact, the state accounted for almost half of the national gain in earnings in durable-goods manufacturing, $1.2 billion out of $2.6 billion, despite a job loss of 3.1 percent. The opposite movements in earnings and jobs primarily reflected the GM and Delphi employee buyouts.
The employee buyouts were also apparent in the earnings of other Great Lakes states, such as Indiana and Ohio, and in Louisiana and Delaware. Excluding the buyouts, earnings growth in the durable-goods industry was anemic across the country.
Property income and transfers
Property income (dividends, interest, and rent) grew 2.3 percent in the third quarter, compared with 2.4-percent growth in the second quarter. Rental income of persons grew 2.9 percent in the third quarter; in the second quarter, it had fallen to its lowest level since the early 1990s (excluding the third quarter of 2005, which was abnormal because of Hurricane Katrina).
Transfers grew 1.8 percent after growing 1.2 percent in the second quarter. The incorporation of new 2006 data for the Alaska Permanent Fund benefits, a component of personal current transfer receipts, raised Alaska's transfer growth rate to 7.4 percent in the first quarter, compared with the previously estimated 2.8-percent growth rate.
Revised second-quarter growth
Revised second-quarter data revealed weaker personal income growth, particularly in two regions. Growth in the Mideast was revised to 0.5 percent from 1.7 percent, reflecting declines in Delaware and New York, and growth in New England was revised to 0.7 percent from 1.7 percent, reflecting declines in Connecticut and Vermont. The slower second-quarter growth rates stemmed from declining earnings in the finance industry mainly because of unusually large wage payments in the first quarter.
(1.) Personal income is the income received by all persons from all sources; it is defined as the sum of net earnings by place of residence, rental income of persons, personal dividend income, personal interest income, and personal current transfer receipts. Personal income for the Nation is the sum of personal income estimates for all states and the District of Columbia.