Pew's Analysis of Growth in Personal Income Shows Uneven US Recovery
Note: On April 20, 2016, this Pew Charitable Trust analysis was updated to correct the number of states in which personal income increased at a slower pace in the past year than since the start of the recession.
One of the longest US economic expansions in history has lifted personal income in all states. But growth has varied, from a constant annual rate of less than 1 percent in Nevada to more than 5 percent in North Dakota since the start of the Great Recession. A handful of states, though, lost some gains in the fourth quarter of 2015.
Nationwide, growth in personal income has been slower than normal. Since the downturn began in the fourth quarter of 2007, estimated US personal income has increased by a constant annual rate of 1.6 percent through the fourth quarter of 2015, compared with 2.8 percent over the past 30 years, after accounting for inflation.
States have recovered at different paces. Adjusted for inflation, personal income in 21 states has grown faster than in the nation as a whole since the start of the recession. Only in mid-2015 did the final state — Nevada — recover its personal-income losses and return to its pre-recession level.
In the latest year of this post-recession expansion, all but six states continued to make gains. Personal income in the fourth quarter of 2015 fell from a year earlier in Iowa, Nebraska, North Dakota, Oklahoma, South Dakota, and Wyoming. Despite the drops, personal income in those states remained higher than before the recession. Overall, inflation-adjusted personal income grew by 2.9 percent at the close of 2015 compared with a year earlier, with 17 states outpacing U.S. growth.
Personal income estimates are widely used to track state economic trends. As the economy expands or shrinks, state personal income also changes. These trends matter not only for individuals and families but also for state governments, because tax revenue and spending demands may rise or fall along with residents' incomes. Comprising far more than simply employees’ wages, the measure counts all sorts of income received by state residents such as earnings from owning a business or investing, as well as benefits provided by employers or the government.
Trends in inflation-adjusted personal income since 2007, the onset of the recession:
- North Dakota (5.1 percent) enjoyed the fastest annualized growth since the start of the recession, measuring by the constant pace it took for personal income to reach current levels. Next were other leading oil-producing states: Texas (3.0 percent), Alaska (2.6 percent), Oklahoma (2.3 percent), and Colorado (2.2 percent).
- Nevada, where home prices and construction earnings plunged when the housing bubble burst, had the slowest growth among all states: an annualized rate of just 0.2 percent since the fourth quarter of 2007.
- After Nevada, Illinois (0.6 percent), Maine (0.8 percent), Connecticut (0.8 percent), and Arizona (0.9 percent) had the slowest annualized growth rates for personal income.
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