New reports on personal income and GDP for the first quarter show signs of relative weakening of the Arkansas economy.
Personal income increased at a 3.2% annual rate in the first quarter, well below the national growth rate of 5.1%. (Personal income figures are not adjusted for inflation.) Arkansas growth rate ranked among the lowest in the nation, ranking 45th among the 50 states. The report from the Bureau of Economic Analysis showed reported that “Nationally, Nationally, earnings, property income (dividends, interest, and rent), and transfer receipts all contributed to the increase in personal income.” However, the growth rate of net earnings was only 0.1% in Arkansas, the lowest growth rate in the nation.
Among the components of earnings, wages and salaries increased at a 4.6% rate, outpacing the nationwide growth rate of 2.4%. However, proprietors’ income declined at an annualized rate of 21.8%.
The decline in proprietors’ income was, in turn, entirely attributable to farm proprietors’ income. In fact, total farm income declined at a rate of 54.1%. Rising farm income had been a contributing factor to higher growth rates in 2022, so although the decline in the first quarter is disappointing, farm income remains a positive contribution to total earnings.
Quarterly growth rates of personal income can vary significantly without necessarily indicating a change in trend. If we consider the longer-term performance of income growth in Arkansas, the first-quarter results are disappointing but they do not suggest an imminent downturn. In fact, the growth rate of total personal income over the past four quarters has been 6.2% in Arkansas and 5.1% for the U.S.
Figures for Arkansas GDP showed similar relative weakness. Real GDP growth in the first quarter came in at an annualized growth rate of only 0.2%, compared to a nationwide growth rate of 2.0% (inflation-adjusted). Arkansas’ growth rate was among the lowest in the nation, with only Rhode Island showing slower growth (0.1%).
As we saw in the case of personal income, much of the first quarter slowdown in GDP was attributable to farm sector. In contrast to a positive contribution to the national growth rate, the contribution of Agriculture, forestry, fishing, and hunting was to subtract 0.6% from GDP growth in Arkansas. Other factors subtracting from growth included Manufacturing, Finance and insurance, and Real estate. In contrast, significant positive contributions were recorded for Construction, Wholesale and Retail trade, as well as Accommodation and food services.
As is the case for personal income, the first quarter performance of Arkansas GDP is disappointing, but does not necessarily indicate a significant change in trend. Over the longer term, Arkansas growth has been relatively strong. Since the fourth quarter of 2019, cumulative growth has totaled 7.8% in Arkansas, compared to 5.6% for the U.S.
The next release of GDP and Personal Income data will be in September, which will include annual revisions to the data.