Regional quarterly report: state personal income and more...

Lenze, David G.

Third quarter of 2015

State personal income growth accelerated in Texas and 20 smaller states but slowed in 22 states, including California, Florida, and New York in the third quarter of 2015. (1) On average, state personal income growth continued in the third quarter at the same 1.3 percent pace of the second quarter (chart 1). Inflation, as measured by the national price index for personal consumption expenditures, slowed to 0.3 percent in the third quarter from 0.5 percent in the second quarter.

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Personal income growth rates in the third quarter ranged from 0.6 percent in Alaska to 2.2 percent in Nebraska and South Dakota (table A). The growth rates of these three states, as well as Iowa's 2.1 percent growth rate, differed significantly from the national average. (2) In each case, the contribution of net earnings made the difference. (3) Nationally, net earnings contributed 0.9 percentage point to personal income growth. In Nebraska and South Dakota, net earnings contributed 1.9 percentage points, and in Iowa, it contributed 1.7 points to personal income growth. In contrast, net earnings contributed only 0.4 percentage point to personal income growth in Alaska.

In addition, net earnings was primarily responsible for the acceleration in the personal income growth in Texas and the slowdown in personal income growth in California and New York. In contrast, property income and transfer receipts were responsible for the slowdown in Florida's personal income growth.

Earnings by state and industry

Overall, earnings increased 1.4 percent in the third quarter of 2015 after increasing 1.2 percent in the second quarter (table B).

Earnings grew in every state in the third quarter of 2015, including the six states (Louisiana, Minnesota, North Dakota, Oklahoma, Texas, and Wyoming) where earnings fell in the second quarter. In the third quarter, Minnesota's earnings growth (1.6 percent) exceeded the national average, but the earnings growth rates in the five mining states were below the average.

Farm earnings grew in every state except North Dakota in the third quarter. The increase exceeded 25 percent in six of the seven states in the Plains Region (Iowa, Kansas, Minnesota, Missouri, Nebraska, and South Dakota). Third-quarter farm earnings reflected lower production expenses, including lower fuel and livestock costs.

Although nonfarm earnings grew at the same pace in the second and third quarters nationally, its growth slowed or accelerated substantially in several states. Among the states with slower growth were New York, where nonfarm earnings growth slowed from 2.3 percent to 1.3 percent, and California, where growth slowed from 2.3 percent to 1.4 percent.

The slowdown in New York was primarily in finance, which grew 1.2 percent in the third quarter, down from 4.4 percent in the second quarter. In California, the slowdown was primarily in manufacturing, which grew 0.2 percent in the third quarter, down from 5.7 percent in the second quarter. (4)

In contrast, nonfarm earnings grew 1.3 percent in Minnesota in the third quarter after falling -0.1 percent in the second. The earnings recovery in Minnesota was primarily in health care and finance. Health care earnings grew 1.6 percent in the third quarter after falling 2.2 percent in the second quarter, and finance earnings grew 1.8 percent following a 3.1 percent decrease in the second quarter.

Earnings grew 0.6 percent in Alaska in the third quarter, the smallest increase of all states. Even so, that was an improvement over its 0.5 percent increase in the second quarter. Earnings declined in four industries in Alaska in the third quarter: mining (-1.7 percent), administrative support (-0.4 percent), state and local government (-0.3 percent), and transportation (-0.2 percent). In the second quarter, earnings fell in state and local government as well as seven other industries.

Nationally, mining earnings fell 1.9 percent, the third consecutive decline. The largest percentage declines were in West Virginia and North Dakota, where mining earnings fell 3.5 percent (chart 2).

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Property income

Property income (dividends, interest, and rent) grew 1.2 percent in the third quarter of 2015, the net effect of 1.5 percent gains in interest and rent and a 0.4 percent increase in dividends (table C). In the second quarter, property income grew 1.8 percent. Property income contributed as little as 0.1 percentage point to personal income growth in the third quarter in Mississippi and Tennessee and as much as 0.3 percentage point in seven states: Arizona, California, Florida, Idaho, Nevada, Washington and Wyoming.

Personal current transfer receipts

Personal current transfer receipts grew 0.9 percent in the third quarter after growing 1.0 percent in the second quarter of 2015. This was the net result of an acceleration in the growth of Medicaid benefits to 2.2 percent from 1.0 percent, a continued decline in state unemployment insurance benefits (0.5 percent in the third quarter, compared with 5.4 percent in the second quarter), and a slowdown in the growth of other transfer receipts to 0.6 percent from 1.1 percent (table D).

New York's 1.7 percent increase in transfer receipts was the largest of all states in the third quarter and contributed 0.3 percentage point to personal income growth. Most of the increase was in Medicaid receipts, which increased 4.4 percent in the third quarter after growing 3.8 percent in the second quarter.

Transfers receipts increased 0.1 percent in Alaska and Indiana in the third quarter, the smallest increases of all states. Medicaid transfers fell 2.7 percent in Alaska and 2.0 percent in Indiana.

State unemployment insurance (UI) benefits rose 29 percent in North Dakota following an 82 percent increase in the second quarter (chart 3). In the third, quarter state UI benefits were $219 million in North Dakota, 60 percent higher than their peak after the last recession in the third quarter of 2009.

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David G. Lenze prepared this report.

(1.) State personal income, which is measured in current dollars, is the sum of net earnings by place of residence, property income, and personal current transfer receipts. Quarterly estimates in dollars are expressed at seasonally adjusted annual rates; quarter-to-quarter percent changes are not annualized.

(2.) Their growth rates were at least two standard deviations above or below the national average.

(3.) Net earnings by place of residence is earnings by place of work (the sum of wages and salaries, supplements to wages and salaries, and proprietors' income) less contributions for government social insurance, plus an adjustment to convert earnings by place of work to a place-of-residence basis.

(4.) There was a bonus in the pharmaceutical preparation manufacturing industry in California in the second quarter of 2015.

Table A. Contribution to Percent Change in Personal Income

                                     Percentage points
                        Personal  Net         Dividends,  Personal
                        income    earnings    interest,   current
                                              and rent    transfer
                                                          receipts
                                               2015:II

United States           1.3       0.8          0.3         0.2
Alabama                 0.5       0.1          0.3         0.2
Alaska                  0.6       0.4          0.3        -0.1
Arizona                 1.3       0.7          0.4         0.3
Arkansas                1.4       0.9          0.3         0.1
California              2.2       1.5          0.4         0.3
Colorado                1.3       0.8          0.3         0.2
Connecticut             1.5       1.0          0.4         0.1
Delaware                1.4       0.9          0.3         0.2
District of Columbia    1.2       0.9          0.5        -0.2
Florida                 1.4       0.7          0.4         0.2
Georgia                 1.1       0.7          0.2         0.2
Hawaii                  1.3       0.9          0.4         0.0
Idaho                   0.9       0.4          0.4         0.2
Illinois                0.8       0.2          0.4         0.2
Indiana                 1.6       1.2          0.2         0.1
Iowa                    0.8       0.4          0.3         0.1
Kansas                  1.1       0.7          0.3         0.1
Kentucky                1.3       1.0          0.2         0.1
Louisiana               0.4      -0.2          0.3         0.4
Maine                   1.9       1.4          0.3         0.2
Maryland                1.4       1.1          0.3        -0.1
Massachusetts           1.4       1.1          0.3         0.0
Michigan                1.2       0.7          0.3         0.3
Minnesota               0.1      -0.1          0.2        -0.1
Mississippi             1.1       0.6          0.2         0.2
Missouri                1.3       0.8          0.3         0.1
Montana                 1.0       0.4          0.4         0.2
Nebraska                1.3       0.9          0.3         0.1
Nevada                  2.0       1.3          0.5         0.2
New Hampshire           2.0       1.3          0.4         0.3
New Jersey              1.5       1.1          0.3         0.0
North Carolina          1.6       1.1          0.3         0.2
North Dakota           -1.4      -2.0          0.3         0.3
Ohio                    1.2       0.8          0.3         0.2
Oklahoma               -0.5      -0.8          0.2         0.1
Oregon                  1.3       0.6          0.3         0.3
Pennsylvania            0.7       0.3          0.3         0.0
Rhode Island            1.6       1.1          0.3         0.1
South Carolina          1.5       0.9          0.3         0.3
South Dakota            1.4       0.9          0.3         0.1
Tennessee               1.8       1.6          0.2         0.0
Texas                   0.2      -0.3          0.3         0.2
Utah                    1.7       1.1          0.4         0.1
Vermont                 1.0       0.4          0.3         0.2
Virginia                1.7       1.2          0.3         0.2
Washington              2.1       1.7          0.5         0.0
West Virginia           0.9       0.5          0.2         0.2
Wisconsin               1.0       0.6          0.3         0.2
Wyoming                -0.3      -1.0          0.5         0.2


                        Personal  Net       Dividends,  Personal
                        income    earnings  interest,   current
                                            and rent    transfer
                                                        receipts
                                            2015:III

United States           1.3       0.9       0.2         0.2
Alabama                 1.2       0.9       0.2         0.1
Alaska                  0.6       0.4       0.2         0.0
Arizona                 1.4       1.0       0.3         0.2
Arkansas                1.3       1.0       0.2         0.2
California              1.4       1.0       0.3         0.1
Colorado                1.1       0.7       0.2         0.2
Connecticut             1.3       0.9       0.2         0.1
Delaware                1.4       1.0       0.2         0.3
District of Columbia    1.3       0.8       0.3         0.2
Florida                 1.2       0.8       0.3         0.1
Georgia                 1.3       1.0       0.2         0.1
Hawaii                  1.3       0.9       0.2         0.2
Idaho                   1.8       1.4       0.3         0.2
Illinois                1.1       0.9       0.2         0.0
Indiana                 1.3       1.1       0.2         0.0
Iowa                    2.1       1.7       0.2         0.3
Kansas                  1.7       1.3       0.2         0.1
Kentucky                1.3       0.9       0.2         0.3
Louisiana               1.1       0.7       0.2         0.2
Maine                   1.3       1.0       0.2         0.2
Maryland                1.1       0.9       0.2         0.0
Massachusetts           1.2       0.8       0.2         0.1
Michigan                1.4       1.0       0.2         0.2
Minnesota               1.4       1.1       0.2         0.2
Mississippi             1.2       0.9       0.1         0.2
Missouri                1.4       1.0       0.2         0.2
Montana                 1.4       1.0       0.2         0.1
Nebraska                2.2       1.9       0.2         0.1
Nevada                  1.2       0.7       0.3         0.2
New Hampshire           1.2       0.9       0.2         0.1
New Jersey              1.2       0.8       0.2         0.1
North Carolina          1.5       1.0       0.2         0.3
North Dakota            0.9       0.4       0.2         0.2
Ohio                    1.3       0.9       0.2         0.2
Oklahoma                1.0       0.7       0.2         0.2
Oregon                  1.5       1.0       0.2         0.2
Pennsylvania            1.3       0.9       0.2         0.2
Rhode Island            1.2       0.8       0.2         0.2
South Carolina          1.2       0.9       0.2         0.1
South Dakota            2.2       1.9       0.2         0.1
Tennessee               0.9       0.6       0.1         0.2
Texas                   1.1       0.8       0.2         0.2
Utah                    1.5       1.1       0.2         0.1
Vermont                 1.3       0.9       0.2         0.2
Virginia                1.1       0.8       0.2         0.1
Washington              1.3       0.8       0.3         0.2
West Virginia           0.7       0.3       0.2         0.2
Wisconsin               1.5       1.2       0.2         0.1
Wyoming                 1.1       0.6       0.3         0.1

NOTE. Net earnings is earnings by place of work less contributions for
government social insurance plus the adjustment for residence.

Table B. Growth of U.S. Earnings by Industry

                                     Percent change  Dollar change
                                                      (millions
                                                      of dollars)
                                      2015            2015
                                      II        III    II      III

All industries                        1.2       1.4   134,849  150,133
 Private sector                       1.4       1.5   123,877  138,175
  Farm                               -4.5      17.5    -3,702   13,859
  Nonfarm                             1.4       1.4   127,579  124,317
   Forestry, fishing, and related
    activities                        1.6       5.7       578    2,086
   Mining                            -5.5      -1.9   -10,148   -3,309
   Utilities                          0.7       1.9       605    1,642
   Construction                       2.6       1.6    16,264    9,963
   Durable-goods
    manufacturing                     1.1       0.8     7,185    5,658
   Nondurable-goods
   manufacturing                      1.2       1.7     4,557    6,480
   Wholesale trade                    1.1       0.6     6,050    3,460
   Retail trade                       2.3       1.9    14,827   12,336
   Transpor tation and
    warehousing                       0.4       1.1     1,662    4,077
   Information                        2.0       1.3     7,509    4,710
   Finance and insurance              1.6       1.5    12,069   11,898
   Real estate and rental and
    leasing                           1.7       0.8     4,061    2,089
   Professional, scientific, and
    technical services                1.8       1.7    19,718   18,808
   Management of companies
    and enterprises                   1.6       1.5     4,591    4,340
   Administrative and waste
    management services               1.5       1.5     6,490    6,748
   Educational services               1.0       1.0     1,915    1,859
   Health care and social
    assistance                        1.4       1.6    17,007   18,870
   Arts, entertainment, and
    recreation                        1.9       2.7     2,287    3,383
   Accommodation and food
    services                          2.0       1.5     7,236    5,398
   Other services, except public
    administration                    0.8       1.0     3,117    3,821
Government sector                     0.6       0.7    10,972   11,957
Federal government, civilian          1.4       0.8     4,452    2,608
Military                             -0.4       0.3      -484      369
State and local government            0.5       0.7     7,004    8,981

                                       Size
                                      (millions of dollars)
                                       2015
                                        II         III

All industries                       10,968,808   11,118,941
 Private sector                       9,156,147   9,294,323
  Farm                                   78,987      92,845
  Nonfarm                             9,077,161   9,201,477
   Forestry, fishing, and related
    activities                           36,490      38,575
   Mining                               175,538     172,229
   Utilities                             86,654      88,296
   Construction                         634,167     644,130
   Durable-goods
    manufacturing                       669,076     674,734
   Nondurable-goods
   manufacturing                        374,900     381,380
   Wholesale trade                      556,295     559,755
   Retail trade                         652,546     664,882
   Transpor tation and
    warehousing                         379,031     383,107
   Information                          374,013     378,723
   Finance and insurance                772,781     784,679
   Real estate and rental and
    leasing                             247,475     249,564
   Professional, scientific, and
    technical services                1,107,692   1,126,500
   Management of companies
    and enterprises                     291,080     295,420
   Administrative and waste
    management services                 452,568     459,316
   Educational services                 187,307     189,166
   Health care and social
    assistance                        1,191,437   1,210,307
   Arts, entertainment, and
    recreation                          124,956     128,339
   Accommodation and food
    services                            361,933     367,330
   Other services, except public
    administration                      401,223     405,044
Government sector                     1,812,661   1,824,618
Federal government, civilian            316,787     319,395
Military                                130,552     130,921
State and local government            1,365,322   1,374,303

Table C. Growth of U.S. Dividends, Interest, and Rent

                      Percent change  Dollar change
                                     (millions
                                      of dollars)
                      2015             2015
                      II     III      II      III

Dividends, interest,
and rent               1.8   1.2      49,804  33,026
Dividends              0.2   0.4       1,951   3,758
Interest               2.4   1.5      30,727  19,720
Rent                   2.7   1.5      17,126   9,548

Table D. Growth of U.S. Personal Current Transfer Receipts

                                       Percent change  Dollar change
                                                      (millions
                                                       of dollars)
                                       2015             2015
                                       II     III      II      III

Personal current transfer receipts     1.0    0.9      25,533  24,762
Medicaid                               1.0    2.2       5,052  11,451
State unemployment insurance          -5.4   -0.5      -1,858    -176
Social Security, Medicare, and other   1.1    0.6      22,339  13,487