The latest report on state-level personal income came out late last week. The significance of the most recent data is of interest, but its relevance for our current situation and outlook for the near future is eclipsed by data revisions that substantially altered some key components of recent income growth.
First, the most recent numbers: In the second quarter, Arkansas Personal Income expanded at an annualized rate of 4.3%, one percentage point lower than the national average of 5.3%. Growth rates ranged from a high of 6.9% in South Carolina to a low of 2.3% in North Dakota. Arkansas ranked #40 among the 50 states.
The composition of income growth in the fourth quarter shows that the Earnings component fully accounted for the fact that Arkansas’ growth rate was slower than the national average. Dividends, Interest, and Rent as well as Transfer Receipts each contributed about the same amount to income growth in Arkansas compared to the U.S.
As shown in the further breakdown below, the shortfall in earnings was entirely attributable to Proprietors’ Income. Not surprisingly, given its recent volatility, Farm Proprietors’ income accounted for most of that decline, falling at an annualized rate of 76%. Nonfarm Proprietors’ Income increased at a rate of 3.3%.
The figure below puts the most recent change into context relative to the (revised) trends. Expressed as index values normalized to 2020:Q1=100, the figure shows that Arkansas Personal Income has shown cumulative growth of 36.4% compared to 31.4% for the U.S. To adjust for the recent volatility of farm income, the figure also shows a measure of personal income excluding farm income. By that measure, the acceleration of income growth in 2022 and the slowdown in 2023 are smoothed out considerably.
Data Revisions
The data revisions that underly the figure above are more significant than the most recent quarterly growth rate. The latest report incorporated the results of BEA’s annual updates, utilizing “new and revised source data that are more complete and more detailed than previously available.” For Arkansas, the revision showed significantly higher growth over the past five years than did the previously-published data. The newly-revised data show that Personal Income in Arkansas for the first quarter of 2024 was $12.2 billion higher than previously estimated—an upward revision of 7.2%.
A breakdown of the sources of revision shows that the gains were positive across all major components, and generally larger for Arkansas than for the U.S. data (with the exception of Transfer Receipts). Of particular significance are the revision so Proprietors’ Income and Dividends, Interest, and Rent.
The increase in estimates of Dividends, Interest, and Rent amounted to nearly $9 billion as of the first quarter of 2024, accounting for 73% of the full revision to Personal Income.
The upward revision to Proprietors’ Income amounted to nearly 1.5 billion—accounting for 18.4% of the total revision to first quarter personal income. Both farm and nonfarm were substantially revised upward, with farm income accounting for 8.3% of the first quarter revision, and nonfarm proprietors’ income accounting for 3.8%.
Although the second quarter statistics show somewhat disappointing income growth, the revisions show that the quarterly slowdown in personal income growth—such as it is—appears as a minor distraction from more positive long-term trends.