Last week’s release of new GDP data coincided with a new report on state-level personal income. The Bureau of Economic Analysis indicated that the two reports would be released simultaneously from now on. There is some logic in that plan: GDP and personal income statistics share many of the same original data sources and so the information is overlapping. One distinction between the two reports is that the highlighted GDP statistic is “real,” or inflation-adjusted, whereas the personal income statistics are in nominal terms. Regarding the GDP report, we noted that the implicit price index has been increasing faster in Arkansas than nationwide, boosting nominal measures of economic activity. This shows up in the personal income statistics as strong nominal growth.
The second quarter growth rate of personal income in Arkansas was 6.9% (annualized), compared to 5.8% for the U.S. The second quarter figure for Arkansas was revised significantly higher, with a growth rate that is now reported to have been 9.4%, up from the originally-reported rate of 5.5%. For the first two quarters of the year, the growth rate of Arkansas personal income was 8.1% (annualized), well-above the 4.4% national average. Among the 50 states, Arkansas’ growth rate ranked 5th highest in the nation.
Among the major components of personal income growth, Proprietors’ income increased dramatically, rising at a 53% rate. This increase contributed 3.3 percentage points to the state’s total personal income growth of 6.9%. The increase in proprietors income was entirely in farming. Nonfarm proprietors’ income declined slightly in the second quarter, while farm income rose at a 288% rate. Nationwide, the growth of personal current transfer receipts has slowed considerably with the winding down of covid-related transfer payments. In Arkansas, transfers continued to contribute to income growth.
As was the case for GDP, the second-quarter data included revisions dating back to 2017. The cumulative effects of the revisions were relatively small, with the exception of proprietors’ income (revised upward) and Dividends, interest and rent (revised downward.) The revision to proprietors’ income affected only post-covid data. The revision to Dividends, interest and rent was large and persistent, with the revised data showing a smaller contribution from this component from 2017 onward.
Earnings by Industry
A breakdown of earnings by industry shows many of the same patterns that we saw for GDP. Total earnings contributed approximately 4.0 percentage points to total personal income growth, with 3.4 percentage points coming from the Farm sector. Industries with negative contributions to growth included retail trade and real estate. As was the case with GDP, a large negative contribution came from Management of companies and enterprises (following an unusual upward spike in the first quarter).