For U.S., the third quarter increase represents the fourth consecutive quarter of growth. For Arkansas, the run of positive growth had now gone for five quarters. The chart below compares the pattern of personal income growth for both the U.S. and Arkansas, relative to their common cyclical peak in 2008:Q2. Total personal income in Arkansas didn’t decline as sharply as the U.S. during the recession, and it has increased slightly faster during the recovery.
As discussed in a previous article, the BEA definition of personal income includes transfer receipts (social security payments, unemployment insurance, etc.). During recessions transfers tend to rise, serving as a buffer that protects total income from sharp declines. A better measure of the underlying strength of the economy omits transfers: Personal Income less Transfer Receipts. By this measure, incomes peaked in the third quarter of 2008 and declined sharply through the second quarter. U.S. income less transfers declined for another quarter, while in Arkansas the recovery in income growth began rising and has outpaced U.S. growth since then.
In the third quarter, Personal Income less Transfer Receipts rose by 0.7% in Arkansas and 0.5% for the nation as a whole. Transfer Receipts increased by 1.5% in Arkansas and by 1.3% nationwide. Hence, part of Arkansas relatively high growth rate was due to an relatively larger expansion of transfer payments. But even after accounting for this factor, Arkansas personal income grew at a faster rate than the total for the U.S.
The third quarter personal income report suggests that the economic recovery is ongoing, and that Arkansas continues to emerge slightly ahead of the rest of the the nation.