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Personal Income – Second Quarter 2011

Arkansas personal income growth in the second quarter was 1.3%, slightly above the national average rate of 1.1%.  According to the latest statistics from the Bureau of Economic Analysis, Arkansas’ growth rate ranked 15th among the 50 states.  Each of the three major categories of incomes — Net Earnings; Dividends, Interest, and Rent; and Transfer Payments — contributed to the increase. 

Source:  Bureau of Economic Analysis
Source: Bureau of Economic Analysis

The latest state personal income release incorporated recent revisions that were published for the national data in late August.  For Arkansas, total personal income was revised upward by 1.0% for 2008 and downward by 0.8% and 1.2% in 2009 and 2010.  As a result, the decline in income during the 2008-09 recession is now estimated to be considerably larger than previously reported.  From a peak in 2008:Q2 to a trough in 2009:Q3, Arkansas personal income declined by 3.5%.  Previously published data had shown a peak-to-trough decline of only 1.5%.

Source:  Bureau of Economic Analysis
Source: Bureau of Economic Analysis
In comparison to revised data for the U.S., however, the recessionary decline in income in Arkansas was still less severe.  The figure below compares indexes for the U.S. and Arkansas, normalized to the peak quarter of 2008:Q2.  The peak-to-trough decline in income for the U.S. was over 5.5%.  Arkansas income growth since the low point of 2009:Q3 has generally kept pace with national growth.  As of the second quarter of this year, total personal income in Arkansas was 4.3% above the 2008 peak.
 
Source:  Bureau of Economic Analysis
Source: Bureau of Economic Analysis
As reported in previous posts, personal income during recessions tended to be boosted by government transfer payments — through both “automatic stabilizers” that tend to increase when the economy weakens (e.g. unemployment insurance payments) and activist “stimulus” programs.  Consequently, measures of personal income net of government transfers provides a more accurate view of the strength of the underlying private-sector economy.  As shown in the chart below, personal income declined more precipitously during the recession and has been slower to recover when measured net of government transfer payments.  Without transfers, the peak-to-trough decline in  personal income was 6.8% in Arkansas and 8.8% for the U.S.  In both cases, the second quarter data show that personal income less transfer payments have only now recovered to their pre-recession levels.
Source:  Bureau of Economic Analysis
Source: Bureau of Economic Analysis
The fact that Arkansas fared better than many other parts of the country has meant that our relative position in terms of per capita income has improved from pre-recession levels.  In 2008, Arkansas’ per capita income was 80% of the national average.  In 2009 and 2010, it had increased to 82%.  As a result, Arkansas’ relative ranking rose from 47th to 44th.
Source:  Bureau of Economic Analysis
Source: Bureau of Economic Analysis
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