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

Lenze, David G.

First quarter of 2014

Personal income resumed growing in seven states in the first quarter of 2014 after declining in the fourth quarter of 2013. In 4 states, personal income continued to decline, while in 39 states, it continued to grow. (1)

North Dakota had the largest first-quarter personal income decline of the four states where personal income fell. Personal income in the state fell 2.9 percent in the first quarter after falling 1.1 percent in the fourth quarter. In contrast, Vermont, Washington, and West Virginia were the fastest growing states in the first quarter. Growth accelerated to 1.4 percent in each.

On average, state personal income increased 0.8 percent in the first quarter, compared with a 0.5 percent increase in the fourth quarter of 2013 (chart 1). Inflation, as measured by the national price index for personal consumption expenditures, was 0.3 percent in the first quarter, the same as in the fourth quarter of 2013.

The pattern of first-quarter personal income growth reflected a wide range in the rates of change in net earnings and personal current transfer receipts across the United States. Net earnings, which are generated from the production of goods and services, fell in eight states, including the four states where personal income fell. (2) In nine states, personal current transfer receipts from governments and businesses to persons accounted for most of the personal income growth in the first quarter (table A).

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Earnings by industry

Overall, earnings increased $79.5 billion in the first quarter of 2014, compared with $75.1 billion in the fourth quarter of 2013 (table B). Earnings--which in addition to compensation of employees, includes proprietors' income--is the broadest measure of industrial activity available quarterly for states. Unlike personal income--which is measured by place of residence and includes transfers as well as income earned anywhere in the world--earnings by industry is measured by place of work, that is, the state in which the industrial establishments are located and the output produced.

Earnings grew in 19 of the 24 industries for which BEA prepares quarterly estimates, with the largest increases in professional services ($22.1 billion), construction ($19.4 billion), and finance ($9.2 billion).

California, New York, Texas, and Florida accounted for the bulk of the increase in professional services earnings ($9.3 billion), an industry which includes among other services, computer programming services, engineering services, and legal services. The pace of earnings growth in the professional services industry accelerated in the first quarter nationally and in 20 states, including California, New York, Texas, and Florida.

The first-quarter increase in construction earnings, $19.4 billion, was more than double the $9.5 billion fourth-quarter increase. Construction earnings grew $2.7 billion in Texas and $2.6 billion in California (which has 45 percent more residents). Construction earnings fell 1.9 percent in Wyoming, the only state with a first-quarter decline and the state with the largest fourth-quarter increase (10.5 percent).

Mining earnings grew $8.6 billion in the first quarter, compared with a $2.5 billion increase in the fourth quarter. More than half of the mining earnings growth (which includes earnings in the oil and gas industry) was in Texas ($4.7 billion).

Earnings fell in five industries: farming ($16.4 billion), information ($9.2 billion), management of companies ($2.6 billion), durable-goods manufacturing ($1.7 billion), and forestry ($0.1 billion).

Half of the first-quarter farm earnings decline was in the Plains region and Arkansas, which is adjacent to the Plains region. (3) First-quarter farm earnings declined more than $1 billion in North Dakota, Minnesota, Iowa, Arkansas, and Nebraska. Most of the decline stemmed from a fall in the value of crop output, which was down $11.5 billion in the first quarter, and reflected lower wheat prices (down 3 percent) and corn prices (down 1 percent).

Information earnings fell $9.2 billion in the first quarter after rising $14.3 billion in the fourth quarter. This industry includes publishing, telecommunications, and Internet services. Earnings declined $11.0 billion in California and grew $1.8 billion elsewhere. California's first-quarter decline followed a $15.5 billion fourth-quarter increase that included special lump-sum bonuses (chart 2).

Durable-goods manufacturing earnings fell $1.7 billion in the first quarter, following a $2.2 billion increase in the fourth quarter. Bonuses and other special pay contributed to a $1.4 billion first-quarter rise in Washington, the first increase in that state in a year.

Property income

Property income, which consists of income receipts on assets (interest and dividends) and the rental income of persons, increased $7.8 billion in the first quarter after a $6.0 billion fourth-quarter increase. Income receipts on assets--highly concentrated in wealthy households and to a lesser extent disproportionately concentrated in certain states such as Wyoming and Florida--consists of income that arises from current production and from the borrowings of the household and government sectors unrelated to current production.

Transfer receipts

Personal current transfer receipts increased $41.1 billion in the first quarter of 2014 after increasing $4.3 billion in the fourth quarter (table C). This component completes the measurement of personal income, an indicator of the resources available to the household sector for personal outlays on things such as food, medical care, and clothing, for personal taxes, or for personal saving. (4)

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Medicaid benefits, which increased $22.3 billion, were boosted by coverage under the Affordable Care Act (ACA). Benefits increased $24.4 billion in states that expanded their Medicaid programs to cover adults under the age of 65 with incomes below 133 percent of the federal poverty level. Benefits fell $2.1 billion in states that did not expand these programs (chart 3). (5)

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State unemployment insurance (UI) benefits decreased $16.8 billion in the first quarter after falling $1.9 billion in the fourth quarter, reflecting the expiration of the Emergency Unemployment Compensation program. UI benefits fell 27.7 percent in North Carolina, which had ended the Emergency Unemployment Compensation program 6 months earlier.

Other transfer receipts were boosted by a 1.5 percent cost-of-living adjustment to Social Security and several other federal transfer programs. Other transfer receipts were also boosted by health insurance premium subsidies paid in the form of refundable tax credits to enrollees of the ACA exchanges. (6)

(1.) State personal income is the income received by, or on behalf of, all the residents of a state from all sources: It consists of the income received by persons from participation as laborers in production, from owning a home or business, from the ownership of financial assets, and from government and business in the form of transfers. It includes income from domestic sources as well as from the rest of the world.

(2.) Net earnings includes an adjustment for residence and excludes contributions for government social insurance.

(3.) The Plains region consists of Iowa, Kansas, Minnesota, Missouri, Nebraska, North Dakota, and South Dakota.

(4.) In particular, personal outlays includes purchases directly financed by personal current transfer receipts, such as Medicare and Medicaid, and personal saving includes saving in pension plans.

(5.) The effect of the coverage expansion is embedded, but not separately identifiable, in the state-level source data from the Centers for Medicare and Medicaid Services.

(6.) For additional information, see the FAQ, "How will the Affordable Care Act affect BEA's measure of personal income and outlays?" at www.bea.gov.

Table A. Personal Income by Component, by State

                            Percent change

                         2013: IV     2014: I

United States                 0.5          0.8
Alabama                       0.2          1.2
Alaska                        0.4          1.3
Arizona                       0.6          0.9
Arkansas                     -0.2         -0.2
California                    0.9          0.3
Colorado                      0.7          1.3
Connecticut                  -0.1          0.9
Delaware                      1.5          0.6
District of Columbia          0.4          0.9
Florida                       0.9          0.8
Georgia                       0.4          0.8
Hawaii                        1.1          1.3
Idaho                         0.7          0.2
Illinois                      0.6          0.9
Indiana                      -0.2          0.4
Iowa                         -0.5          0.1
Kansas                       -0.1          0.2
Kentucky                      0.3          1.3
Louisiana                     0.1          0.6
Maine                         1.1          0.5
Maryland                      0.4          0.7
Massachusetts                 1.3          0.9
Michigan                      0.6          0.6
Minnesota                    -0.7          0.6
Mississippi                  -0.6          0.5
Missouri                      0.3          0.6
Montana                       0.1          0.5
Nebraska                     -0.9         -0.2
Nevada                        0.8          1.1
New Hampshire                 0.9          0.9
New Jersey                    1.2          0.6
New Mexico                    0.9          0.9
New York                      0.3          1.2
North Carolina                0.8          0.7
North Dakota                 -1.1         -2.9
Ohio                          0.7          1.1
Oklahoma                      0.3          0.6
Oregon                        0.6          1.2
Pennsylvania                  0.3          1.0
Rhode Island                  1.0          0.8
South Carolina                0.9          0.9
South Dakota                 -0.5         -0.3
Tennessee                     0.9          0.6
Texas                         0.6          1.3
Utah                         -0.3          1.1
Vermont                       1.2          1.4
Virginia                      0.3          0.7
Washington                    0.4          1.4
West Virginia                 0.2          1.4
Wisconsin                     0.3          0.7
Wyoming                       1.2          0.4

                             Dollar change (millions of dollars)

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

                                            2013: IV

United States             76,266      65,920        6,015       4,331
Alabama                      350        -222           58         514
Alaska                       132           8           16         107
Arizona                    1,530       1,102          132         297
Arkansas                    -182        -255           20          53
California                16,360      18,625        1,257      -3,522
Colorado                   1,702       1,839           85        -221
Connecticut                 -139        -742          131         471
Delaware                     638         522           25          91
District of Columbia         191         128           29          34
Florida                    7,132       6,058           57       1,017
Georgia                    1,574       2,315           94        -835
Hawaii                       711         552           50         109
Idaho                        392         505           20        -133
Illinois                   3,924       2,962          279         683
Indiana                     -608         -21           96        -684
Iowa                        -686        -440           55        -300
Kansas                       -64        -147           37          45
Kentucky                     404         452           57        -105
Louisiana                    218         448           50        -281
Maine                        603         460           25         119
Maryland                   1,415         785          156         474
Massachusetts              4,823       3,436          192       1,196
Michigan                   2,490       1,562          127         801
Minnesota                 -1,865      -2,376           46         465
Mississippi                 -593        -791           28         170
Missouri                     807       1,033           82        -308
Montana                       48         -49           19          78
Nebraska                    -744        -632           32        -144
Nevada                       914         829           45          40
New Hampshire                619         669           25         -75
New Jersey                 6,128       4,673          327       1,128
New Mexico                   654         405           29         221
New York                   3,614       7,285          370      -4,041
North Carolina             3,135       1,782          164       1,189
North Dakota                -480        -546           19          47
Ohio                       3,270       1,408          210       1,652
Oklahoma                     494         271           43         180
Oregon                       964         692           77         195
Pennsylvania               1,476       1,192          306         -22
Rhode Island                 477         340           29         107
South Carolina             1,533       1,490           54         -11
South Dakota                -179        -189           13          -3
Tennessee                  2,333       2,044          118         171
Texas                      6,852       2,642          287       3,924
Utah                        -304        -365           58           3
Vermont                      342         260           12          69
Virginia                   1,275         503          213         559
Washington                 1,448       1,840          230        -623
West Virginia                130         200           27         -97
Wisconsin                    646       1,059          108        -521
Wyoming                      360         318           -6          48

                             Dollar change (millions of dollars)

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

                                             2014: I

United States            112,668      63,692        7,829      41,147
Alabama                    2,077       1,117           88         872
Alaska                       479         322           21         136
Arizona                    2,216       1,400          137         680
Arkansas                    -182        -574           44         348
California                 4,718      -3,536        1,423       6,831
Colorado                   3,229       2,303          147         779
Connecticut                2,066       1,126          152         788
Delaware                     254         168           29          58
District of Columbia         440         369           31          40
Florida                    6,966       4,197          296       2,472
Georgia                    3,194       1,483          163       1,548
Hawaii                       854         397           61         397
Idaho                        118         -96           33         181
Illinois                   5,186       3,218          316       1,652
Indiana                    1,011         975          120         -85
Iowa                         139        -598           77         659
Kansas                       199         111           59          28
Kentucky                   2,113         848           77       1,189
Louisiana                  1,089         979           86          23
Maine                        271         281           33         -44
Maryland                   2,290       1,752          205         333
Massachusetts              3,553       2,232          235       1,087
Michigan                   2,472       1,324          162         986
Minnesota                  1,554         -14          118       1,451
Mississippi                  468          67           41         360
Missouri                   1,504       1,215          112         177
Montana                      200         104           29          67
Nebraska                    -204        -508           42         262
Nevada                     1,192         942           55         195
New Hampshire                622         415           37         170
New Jersey                 3,007       2,357          348         302
New Mexico                   701         489           47         165
New York                  13,166       6,250          529       6,386
North Carolina             2,534       2,223          218          94
North Dakota              -1,185      -1,268           28          56
Ohio                       5,071       2,079          245       2,747
Oklahoma                     990         932           71         -13
Oregon                     1,950         903          106         942
Pennsylvania               5,673       2,804          350       2,519
Rhode Island                 382         240           32         110
South Carolina             1,599       1,038           89         472
South Dakota                -129        -201           21          51
Tennessee                  1,577       1,609          137        -169
Texas                     15,214      14,237          406         570
Utah                       1,116         852           69         195
Vermont                      412         181           18         213
Virginia                   2,996       2,159          262         575
Washington                 4,731       2,816          238       1,677
West Virginia                897         354           34         509
Wisconsin                  1,762       1,472          144         147
Wyoming                      120         148           10         -38

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)

                               2013:IV   2014:I    2013:IV     2014:I

All industries                    0.7       0.8     75,081     79,537
Private sector                    0.7       0.9     63,116     73,389
Farm                            -15.6     -16.6    -18,335    -16,447
Nonfarm                           0.9       0.9     93,416     95,984
Forestry, fishing, and
  related activities              1.6      -0.4        486       -130
Mining                            1.4       4.8      2,517      8,641
Utilities                        -0.8       2.0       -645      1,684
Construction                      1.7       3.4      9,526     19,362
Durable-goods manufacturing       0.3      -0.3      2,191     -1,742
Nondurable-goods
  manufacturing                   1.7       2.2      6,013      8,009
Wholesale trade                   0.0       0.4        255      1,970
Retail trade                      1.0       0.5      5,915      2,878
Transportation and
  warehousing                     3.4       1.4     11,722      4,908
Information                       4.3      -2.7     14,305     -9,176
Finance and insurance             0.9       1.3      6,669      9,170
Real estate and rental and
  leasing                        -0.2       0.4       -418        857
Professional, scientific,
  and technical services          0.4       2.1      4,531     22,114
Management of companies
  and enterprises                -0.3      -0.9       -752     -2,622
Administrative and waste
  management services             1.3       1.8      5,220      7,459
Educational services              1.0       0.9      1,787      1,639
Health care and social
  assistance                      0.4       0.5      4,201      5,106
Arts, entertainment, and
  recreation                      0.8       1.1        831      1,252
Accommodation and food
  services                        1.0       1.4      3,121      4,407
Other services, except
  public administration           1.1       1.1      3,976      4,050
Government sector                 0.7       0.4     11,965      6,148
Federal government,
  civilian                        2.8       0.1      8,073        332
Military                         -0.6       0.4       -855        611
State and local government        0.4       0.4      4,748      5,204

Note. Earnings by place of work.

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

                               Percent change         Dollar change
                                                   (millions of dollars)

                             2013:IV     2014:I    2013:IV     2014:I

Personal current transfer
  receipts                       0.2        1.7      4,331     41,147
Medicaid                        -0.4        5.1     -1,548     22,316
States expanding
  coverage (1)                  -1.4        9.4     -3,665     24,380
States not expanding
  coverage                       1.2       -1.2      2,117     -2,064
State unemployment
  insurance benefits            -3.2      -28.5     -1,947    -16,810
Other transfer receipts          0.4        1.8      7,826     35,641

(1.) Includes District of Columbia.

Note. Other transfer receipts includes Social Security and Medicare.