State personal income, revised estimates for 1998-2000 - Cover Story

Survey of Current Business, Oct, 2001 by Jeffrey L. Newman

THE Bureau of Economic Analysis (BEA) recently released revised estimates of State personal income for 1998-2000. These estimates incorporate the annual revision of the national income and product accounts (NIPA's) that was released on July 31, 2001, and newly available State source data that are more complete, more detailed, and otherwise more appropriate than those that were previously available. (1)

For the Nation, personal income increased 7.0 percent in 2000, up from a 4.7-percent increase in 1999. Massachusetts led the Nation in personal income growth, at 10.1 percent, and Louisiana had the slowest personal income growth, at 3.7 percent. Fewer than a third of the States had personal income growth that was greater than or equal to the national growth rate. Above-average personal income growth was concentrated in many of the larger States: The 10 fastest growing States accounted for 36 percent of the Nation's personal income, and the 10 slowest growing States accounted for only 14 percent of the Nation's personal income.

According to the State estimates for 2000,

* Two eastern States--Massachusetts and New Hampshire--and two western States--Colorado and California--led the Nation in personal income growth.

* Three southern States--Louisiana, Alabama, and Mississippi--and Hawaii and Nebraska had the slowest personal income growth.

* The District of Columbia, Nevada, and Oregon had the largest revisions to personal income.

This article presents the revised estimates of State personal income for 1998-2000, and it discusses personal income growth in the current economic expansion, which began after the 1990-91 recession. It also describes the sources of the revisions to the estimates for 1998-2000 and the effects of the revisions on the estimates. The State personal income estimates for 1992-2000 are presented in tables 1-3 at the end of this article. (For the availability of more detailed estimates, see the box "Data Availability" on page 103.)

Personal income for States for 2000

In the four fastest growing States--Massachusetts, Colorado, California, and New Hampshire--the growth rates in personal income were at least 2.2 percentage points higher than the 7.0-percent growth rate of the Nation (table A). Growth in these States has been strong over the past 4 years, and growth in Colorado has been strong since 1988.

In the five slowest growing States--Louisiana, Alabama, Hawaii, Mississippi, and Nebraska--the growth rates in personal income were at least 2.7 percentage points lower than the Nation's growth rate. Growth in these States has generally been weak over the past 4 years, and growth in Hawaii has been weak since 1993.

Fastest growing States.-In all four of the fastest growing States, growth in each of the following industries exceeded the U.S. average growth for that industry: Business services, which includes software development, prepackaged software, data processing services, and computer rental and leasing; electronic and other electric equipment manufacturing; and security and commodity brokers. Massachusetts, Colorado, and California also had strong growth in construction and in industrial machinery and equipment manufacturing, which includes computer manufacturing. Massachusetts also had strong growth in communications, which includes telephone, satellite, and multimedia services. Colorado and New Hampshire also had strong growth in wholesale trade. California also had strong growth in State government.

Slowest growing States--In the five slowest growing States, growth in farm earnings declined, and earnings growth in most major sectors was weak. In all the States, growth was weak in business services, and in all the States except Hawaii, growth was weak in most high-tech manufacturing industries. Hawaii had the slowest growth in dividends, interest, and rent, and Nebraska had slow growth in transfer payments, largely due to declines in income maintenance benefits, such as temporary assistance for needy families and food stamps. In Louisiana, earnings declined in petroleum and coal products manufacturing, textile mill products manufacturing, and primary metal industries manufacturing, and earnings slowed in construction. In Alabama, earnings declined in coal mining, lumber and wood products manufacturing, fabricated metal products manufacturing, and military. In Mississippi, earnings declined in lumber and wood products manufacturing, motor vehicles and equipment manufacturing, other transportation equipment manufacturing, textile mill products manufacturing, apparel and other textile products manufacturing, and paper and allied products manufacturing.

Personal income growth in the current expansion

During the current economic expansion, which began after the 1990-91 recession, four western States--Nevada, Colorado, Arizona, and Utah and Georgia have consistently led the Nation in personal income growth. For most of these States, strong growth in high-tech manufacturing and business services contributed to the personal income growth. In addition, Nevada had strong growth in tourism.