Last week’s news release on personal income included new statistics for the second quarter of 2017, along with data revisions for the period 2014-present.
The latest update showed personal income increasing 0.6% in the second quarter, slightly below the national growth rate of 0.7%. Data from the first quarter were revised to show an increase of 2.0% for Arkansas, up from the 1.0% rate previously reported. For the four quarters from 2016:Q2 to 2017:Q2, Arkansas’ growth rate was 3.0%. For the same period, the nation’s income growth rate was 2.9%. After adjusting for an inflation rate of 1.6% (as measured by the price index for personal consumption expenditures), the real year-over-year growth rates of personal income for Arkansas and the U.S. were 1.4% and 1.3%, respectively.
The breakdown of personal income growth in the second quarter reveals that nonfarm income rose 0.9%, while the more volatile farm income component decreased by 15.2%. Among the major sources of income, both Dividends, Interest, and Rent and Wage and Salary Disbursements increased 1.2%. On a year-over-year basis, Arkansas’ 3.0% growth rate reflected a surge in Proprietors’ Income (+7.8%). Arkansas’ growth rate also outpaced the nation in Earnings by place of work (3.3% compared to 2.9% nationwide).
Overall, the annual revisions to the personal income data for 2014-16 raised estimates of Arkansas incomes. The revisions had the effect of raising total personal income by 1.0% in 2014, by 2.0% in 2015 and by 1.0% in 2016.
The bulk of the revisions were attributable to Dividends, Interest and Rent. Cumulatively, that component was revised upward by 10.7%. Personal Current Transfer Receipts were revised upward for 2016 (by 1.0%), but for all other categories of income (including Wage and Salary Disbursements), the cumulative effect of revisions was negative.
We had previously noted that while personal income growth in Arkansas has roughly kept pace with the national average in recent years, its growth has been skewed in favor of the Dividends, Interest and Rent component while Wage and Salary income has grown more slowly than the national average. The new data revisions exacerbate that differential. As shown in the table below, Wage and Salary income has accounted for just over one-half of national personal income growth over the course of the economic expansion. Here in Arkansas, however, Wages and Salaries account for less than 40% of total income growth. In contrast, Dividends, Interest and Rent accounts for over one-third of Arkansas income growth and only 26% at the national level. The other component that has been contributing a relatively large share to Arkansas income growth is Personal Current Transfer Receipts. The growth rates of transfer payments have been roughly the same for Arkansas and the U.S., but that component represents a larger share of total income for Arkansas.
Arkansas per capita personal income in the second quarter was $40,893, representing 81.3% of the national average per capita income of $50,308. As a percent of the national average, the recent data revisions improved Arkansas standing: Before the revisions, per capita income stood at 79.4% of the national average (in the first quarter). It was the cumulative effect of data revisions for 2014-16 that raised estimates for Arkansas back above the 80% line.