Regional and state projections of income, employment, and population to the year 2000.

Johnson, Kenneth P. ; Kort, John R. ; Friedenberg, Howard L. 等

THIS article presents regional and State projections to 2000 of earnings and employment-each of which is shown for 14 industries-and of total personal income, population, and per capita personal income. All projections are based on data through 1988. (An article in the May 1985 SURVEY OF CURRENT Business presented projections of these measures to 2000 based on data through 1983.)

These projections are based on an extension of past economic relationships and assume no major policy changes; they are baseline projections. They are neither goals for, nor limits on, future economic activity in any region or State. These projections have three major uses: (1) Assessing future demand for goods and services by households, businesses, and government, (2) analyzing economic trends to anticipate future economic problems, and (3) providing baselines with which to compare policy forecasts in measuring the effects of policies.

The first part of this article discusses projected trends in earnings by industry and in total personal income, population, and per capita personal income. The second part summarizes projection methodology.

Projected Trends to 2000 Earnings by industry

For the United States, as shown in table 1, earnings (in 1982 dollars) is projected to grow 1.94 percent per year in 1988-2000, slower than in 1979-88 (2.02 percent per year). Likewise, employment is projected to grow slower in 1988-2000 (1.12 percent per year) than in 1979-88 (1.92 percent per year).

The major industries in which the earnings growth rate is projected to exceed or about equal the all-industry growth rate of 1.94 percent per year are services; finance, insurance, and real estate; and retail trade (chart 1). In the first two industries, earnings also grew at above-average rates in 1979-88. In contrast, retail trade earnings grew at a below-average rate in 1979-88; the projected pickup reflects a return to a long-term growth path.

The major industries in which earnings is projected to grow more slowly than average are mining, farming, Federal civilian government, durables manufacturing, nondurables manufacturing, wholesale trade, construction, transportation and public utilities, State and local government, and Federal military government. In all but the last two industries, earnings also grew at below-average rates in 197988. In contrast, in State and local government and in Federal military government, earnings grew at aboveaverage rates in 1979-88. The Federal military projections reflect an assumption of no growth in employment for this sector, and the projected slowdown in State and local government reflects a return to a long-term growth path.

Earnings (and employment) projections for regions reflect a continuation of a 1979-88 pattern of faster growth in coastal regions than in interior regions (table 2). This growth disparity is smaller in the projected period than in 1979-88. In 1988-2000, earnings is projected to grow 1.98 percent per year in coastal regions and 1.87 percent per year in interior regions. In 1979-88, earnings grew 2.79 percent per year in coastal regions and 0.76 percent per year in interior regions. Among coastal regions, earnings is projected to grow faster than the U.S. average in the Southeast and Far West and slower than average in New England and the Mideast. Among interior regions, earnings is projected to grow slower than the U.S. average in the Great Lakes and Plains regions and faster than average in the Rocky Mountain and Southwest regions. Coastal regions.-The slow growth in earnings projected for New England is centered in manufacturing and related service industries and in construction. Manufacturing will be adversely affected by the slowing of the national defense buildup and by the weakening of the region's competitive position in high-technology industries. Industries that provide computer, data processing, and research and development services to the high-technology industries also will be adversely affected. Construction earnings is projected to grow at about one-tenth of the 1979-88 rate in the region. Total earnings is projected to grow slower than the U.S. average in all New England States except New Hampshire and Vermont; growth per year will range from 2.05 percent in New Hampshire to 1.44 percent in Connecticut (chart 2).

The slow growth in earnings in the Mideast region in 1988-2000 reflects weakness in manufacturing, govern ment, and private service-type industries. Weakness in manufacturing and Federal civilian government stems partly from the slowing of the national defense buildup. Slow growth in investment services and business services reflects the reduced role of the New York metropolitan area as a supplier of these services to national and international markets. Total earnings is projected to grow slower than the U.S. average in each Mideast State; growth per year will range from 1.92 percent in Maryland to 1.46 percent in New York.

In the Southeast, projected strength in earnings reflects above-average growth in most major industries. In durables manufacturing, firms in the motor vehicles industry and related industries, such as metals and machinery, will continue to benefit from the Southeast's relatively low wage rates. Strength in tourism will boost earnings in amusement and recreation services. Strong gains in wholesale and retail trade reflect continuing growth in the region's relative market size. Total earnings is projected to grow faster than the U.S. average in Florida, Georgia, Virginia, Tennessee, and North Carolina, and slower than average in the seven other Southeast States. Growth per year will range from 2.62 percent in Florida to 1.17 percent in West Virginia.

The Far West's above-average earnings growth in 1988-2000 is centered in durables manufacturing and private service-type industries. The region's competitive position is projected to strengthen in technologically advanced industries, such as electronic equipment, scientific instruments, and civilian aircraft. In turn, demand for services by the technologically advanced industries will boost earnings in research and development, data processing, and consulting. Above-average gains in construction and related financial and real estate services reflect increased demand for structures by the region's fast-growing industries and for housing by the region's rapidly growing population. Total earnings is projected to grow faster than the U.S. average in each Far West State; growth per year will range from 3.08 percent in Nevada to 2.09 percent in Oregon.

Interior regions.-The slow growth in earnings projected for the Great Lakes region reflects weakness in durables manufacturing and in most major nonmanufacturing industries. The tendency for durables manufacturing to disperse to southern and western regions to benefit from their relatively low wage rates, energy and land costs, and State and local taxes is projected to continue to limit growth in the region. In addition, strong foreign competition is projected to continue to limit growth in the motor vehicles industry, and so suppliers of inputs to the motor vechicles industry, such as the fabricated metals and machinery industries, will experience reduced demand for their products. Among nonmanufacturing industries, retail trade and services will grow slowly; a projected rate of population growth that is slower than in any other region WHI dampen the demand for consumer goods and services. Total earnings is projected to grow slower than the U.S. average in each Great Lakes State. Growth per year will range from 1.76 percent in Wisconsin to 1.56 percent in Ohio.

In the Plains region, projected slow growth in food processing and related private service-type industries will contribute to the region's weak earnings growth in 1988-2000. The relationship between food processing and private service-type industries is most apparent in the slow growth projected for the marketing and trucking of food products. In contrast with earn ings in private service-type industries, earnings in durables manufacturing industries will grow faster in the region than in the Nation. Total earnings is projected to grow slower than the U.S. average in all Plains States except North Dakota and Minnesota; growth per year will range from 1.95 percent in North Dakota to 1.73 percent in Nebraska.

In the Southwest, strength in industries that manufacture transportation and electronic equipment will boost earnings growth in 1988-2000. Among nonmanufacturing industries, earnings in amusement and recreation services and in air transportation is projected to grow faster in the region than in the Nation, reflecting the regions attractiveness to tourists. In contrast with manufacturing and services, the mining industry is projected to continue to be weak. Total earnings is projected to grow faster than the U.S. average in each Southwest State; growth per year will range from 2.86 percent in Arizona to 1.95 percent in Texas.

The fast growth in earnings in the Rocky Mountain region in 1988-2000 mainly reflects strength in manufacturing and private service-type industries. Fast growth in earnings is projected for technologically advanced industries within durables manufacturing. Manufacturing strength, along with rapid population growth, win boost earnings in construction and related financial and real estate services. In contrast with these fast-growing industries, mining is projected to grow slowly in the region. Total earnings is projected to grow faster than the U.S. average in Utah, Colorado, and Idaho and slower than average in Wyoming and Montana; growth per year will range from 2.74 percent in Utah to 1.31 percent in Wyoming. Total personal income, population, and

per capita personal income U.S. per capita personal income (in 1982 dollars) is projected to grow 1.23 percent per year in 1988-2000, compared with 1.53 percent per year in 1979-88. The growth rate in the projected period slows as a result of the relationship between total personal income (TPI) growth and population growth. As shown in table 3, TPI (in 1982 dollars) is projected to grow slower in 1988-2000 (1.96 percent per year) than in 1979-88 (2.56 percent per year), and so is population (0.71 percent per year, compared with 1.01 percent). The slowdown in TPI growth tends to dampen per capita income growth, and the slowdown in population growth tends to boost per capita income growth. However, the dampening effect of the TPI slowdown more than offsets the boosting effect of the population slowdown. The projected slowdown in TPI growth is mainly in personal dividend, interest, and rental income and in transfer payments.

In 1988-2000, regional differences in per capita income are projected to narrow (chart 3). Per capita income will grow slower than the U.S. average in all high-income regions (those with above-average per capita income in 1988) and faster than the average in nearly all low-income regions (those with below-average per capita income in 1988). The projected narrowing is a resumption of a trend that was interrupted in 1979-88: Regional differences in per capita income had narrowed in each decade from the 1930's (the first complete decade for which estimates are available) through the 1970's and then widened in 1979-88.1

Coastal regions.-Per capita income for a region can change relative to the U.S. average because its TPI or its population, or both, grows faster or slower than the U.S. average. Projections of slow per capita income growth in the three high-income coastal regions reflect a variety of conditions: (1) In New England and the Mideast, below-average TPI growth that more than offsets below-average population growth, and (2) in the Far West, aboveaverage population growth that more than offsets above-average TPI growth. Between 1988 and 2000, per capita income is projected to decrease from 122 to 118 percent of the U.S. average in New England, from 115 to 114 percent of the average in the Mideast, and from 110 to 108 percent of the average in the Far West (table 4).

In the Southeast, a low-income region, per capita income in 2000 is projected to be 89 percent of the U.S. average, up from 88 percent in 1988; above-average TPI growth in the projection period will more than offset above-average population growth.

In the Southeast and Far West, the projected covergence of per capita income toward the U.S. average in 19882000 is a continuation of the 1979-88 pattern. In New England and the Mideast, the projected convergence in 1988-2000 contrasts with the pattern of divergence in 1979-88.

Interior regions.-Projections of fast per capita income growth in three of the four low-income regions reflect the following conditions: (1) In the Plains region, below-average population growth that more than offsets below-average TPI growth; (2) in the Rocky Mountain region, above-average TPI growth that more than offsets above-average population growth; and (3) in the Southwest, above-average TPI growth and near-average population growth. Between 1988 and 2000, per capita income is projected to increase from 93 to 95 percent of the U.S. average in the Plains region, from 87 to 88 percent of the average in the Rocky Mountain region, and from 87 to 89 percent of the average in the Southwest. In all three regions, the projected convergence in 1988-2000 contrasts with the pattern of divergence in 1979-88.

The Great Lakes, a low-income region, is the only interior region for which per capita income is projected to grow at the U.S. average rate. Belowaverage TPI growth will offset belowaverage population growth, and per capita income will hold steady at 98 percent of the U.S. average from 1988 to 2000. This steadiness contrasts with the pattern of divergence in 1979-88.

Projection Methodology The methodology underlying the projections presented in this article is similar, for the most part, to that discussed in the BEA regional projections volume published in 1985.2 A new element is the extensive use of econometric modeling of the State economies to make alternative projections for 1995, the first year of the long-term projections. The use of an econometric approach permits the consideration of more complex economic

and demographic interrelationships at

the State level than was previously

possible. For example, the econometric

projections reflect the direct effects of

industrial growth in one State on the

economies of each of the other States.

The projections were made in two

major steps-for the Nation and then

for the States. In the first major step,

long-term national projections were de - veloped for 1995, 2000, 2005, 2010,

2020, and 2040. Gross national prod - uct (GNP) was projected based on

projections of population, labor force,

employment, and GNP per employee.

The population projections were based

mainly on the work of the Census Bu - reau, and the labor force projections

were based mainly on the work of the

Bureau of Labor Statistics. The GNP

projections, for the most part, were

the basis for the derivation of other

national measures, including total per - sonal income by component and both

employment and earnings by indus - try. For 1995, alternative national

projections of total personal income

by component and of both employ - ment and earnings by industry were

derived by summing 1995 economet - ric projections for the States. These

sum-of-state econometric projection then were used to modify the national long-term projections for 1995. In the second major step, State projections of employment and earnings by industry, population, and total personal income by component were made within the framework of the corresponding projected national totals. First, State long-term projections for 1995, 2000, 2005, and 2010 were made, based on historical economic relationships within each State between basic industries-those that mainly serve national markets-and service industries-those that mainly serve local markets. Next, in some cases the State long-term projections to 2010 were modified to be consistent with the State econometric projections for 1995. Then, the State long-term projections to 2010 were extended to 2020 and 2040, based on simplified techniques and assumptions. Finally, the State long-term projections from 1995 to 2040 were evaluated intensively by BEA staff and by State government agencies that participate in the Federal-State Cooperative Program for Population Projections.

For a reference to further information on projection methodology, see the box on data availability.