State personal income, 2012.

Lenze, David G.

Annual statistics for 2012

Average state personal income growth slowed to 3.5 percent in 2012 from 5.2 percent in 2011. State personal income growth ranged from -0.2 percent in South Dakota to 12 percent in North Dakota. Inflation, as measured by the national price index for personal consumption expenditures, fell to 1.8 percent in 2012 from 2.4 percent in 2011.

South Dakota's small decline in personal income was due to the effect of last year's drought on farm income. The drought also had relatively strong adverse effects in Nebraska, Kansas, and Iowa, all of which had below average total personal income growth in 2012. In contrast, nonfarm personal income growth in each of these states was above average.

For the third consecutive year, North Dakota had the fastest personal income growth of all states. Since 2009, personal income in North Dakota has grown at a compound annual rate of 12 percent, substantially outpacing the 4.2 percent growth rate of all other states. In 2012, mining (including oil and gas extraction) and construction accounted for 43 percent of private nonfarm earnings growth in North Dakota.

Two other energy states, Texas and Oklahoma, have also had notably faster than average personal income growth in 2012 and over the last 3 years of the recovery from the recent recession (chart 2). In contrast, Nevada's below average personal income growth in 2012 continues its below average growth since 2009 (chart 2).

Annual earnings

Net earnings (earnings net of contributions for government social insurance and adjusted for residence) grew an average 3.3 percent in 2012 after growing 5.7 percent in 2011. Net earnings growth in 2011 was boosted by a 2 percentage point reduction in the personal contribution rate for social security. (1) The reduction was one of the provisions of the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010.

Earnings grew in 20 industries in 2012, fell in 3 (farming, finance, and real estate), and was unchanged in 1 (military). Despite the 2012 decline, farm earnings in 2012 were second highest ever.

In four industries, 2012 earnings remain below the previous peak: mining, construction, nondurable-goods manufacturing, and real estate. Mining earnings in 2012 are 17 percent below the peak of 2008; construction earnings are 13 percent below the peak of 2006; nondurable-goods manufacturing earnings are 3.2 percent below the peak of 2008; and real estate earnings are 14 percent below the peak of 2005.

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Net earnings in Nevada are still 5.2 percent below the peak reached in 2007. Net earnings in all the other states have surpassed the previous peaks reached in 2007 or 2008. (2)

Health care was the largest private industry in the United States in 2012, accounting for 13 percent of earnings. (3) Its share declined slightly as other industries (including manufacturing and professional services) continue to recover from the recent recession (chart 3).

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Across states, health care was the largest private industry in 18 states, and manufacturing was the largest in 18 states (table D). Professional services was the largest private industry in seven states and the District of Columbia. Finance was the largest private industry in New York, Connecticut, and Delaware; farming was the largest industry in North and South Dakota; accommodations was the largest industry in Nevada, and mining was the largest industry in Wyoming.

(1.) For the nation, employee and self-employed contributions for government social insurance fell $90.5 billion in 2011. These contributions are subtracted in the calculation of personal income.

(2.) However, net earnings in Alaska and the District of Columbia did not decline on an annual basis in the last recession.

(3.) There are 19 "sectors," or what this article is calling private industries, in the North American Industry Classification System.

Table D. Largest Industry by Share of Private Earnings in 2012

 Percent

Health care and social services
 Maine 20.0
 West Virginia 18.3
 Rhode Island 17.8
 Vermont 17.5
 Tennessee 17.1
 Montana 17.0
 Pennsylvania 16.5
 Florida 15.6
 New Mexico 15.5
 Alaska 15.4
 Arizona 15.0
 New Hampshire 14.8
 Missouri 14.6
 Hawaii 14.2
 Idaho 13.8
 Louisiana 13.3
 Nebraska 12.9
 Oklahoma 12.7

Manufacturing
 Indiana 25.3
 Wisconsin 23.0
 Michigan 20.1
 Iowa 18.5
 Kentucky 18.3
 South Carolina 18.3
 Ohio 18.1
 Alabama 17.7
 Kansas 17.4
 Mississippi 16.9
 Oregon 16.0
 Arkansas 15.9
 North Carolina 15.7
 Minnesota 15.0
 Washington 13.8
 Illinois 13.8
 Utah 13.1
 Texas 11.4

Professional, scientific, and technical services
 D.C. 40.4
 Virginia 24.0
 Maryland 18.9
 Massachusetts 17.1
 California 14.9
 Colorado 14.7
 New Jersey 14.3
 Georgia 11.8

Finance and insurance
 New York 20.3
 Connecticut 17.7
 Delaware 16.0

Farm
 South Dakota 16.5
 North Dakota 14.1

Accommodation and food services
 Nevada 19.6

Mining
 Wyoming 21.0