WASHINGTON DC, DECEMBER 19, 2007 - U.S. personal income growth accelerated to 1.4 percent in the third quarter of 2007 from 0.9 percent in the second quarter. The acceleration returns the personal income growth rate close to its average for the last two years after a strong first quarter and weaker second quarter. (The growth rate swings in 2007 are a consequence of bonuses paid in the finance industry in the first quarter.) State personal income growth rates in the third quarter ranged from 0.8 percent to 3.6 percent, with growth accelerating or holding steady in all but 11 states.
The industries with the fastest earnings growth in the third quarter were farming, mining, and management. However, these are quite small industries nationally (individually representing only 1 or 2 percent of personal income). Taking into account both size and growth, the health care and professional services industries contributed most to third quarter personal income growth and have been among the largest contributors to personal income growth for the last year and a half. In addition, the state and local government sector was a major contributor in the third quarter. Together these 3 industries (representing 24 percent of personal income) contributed almost 40 percent of personal income growth. In addition, these 3 industries were the major contributors to growth in most states.
Declines in the construction and real estate industries, in contrast, reduced national third quarter personal income growth about 0.1 percentage point directly and softened growth in related industries such as finance. Some of the largest impacts were in states such as Arizona, California, Florida, and Nevada where a substantial portion of mortgage foreclosures were for investor owned properties.
At the same time, construction contributed more to personal income growth in Louisiana than any other industry-and Louisiana had the third highest growth rate of all states. Construction in Louisiana and Mississippi has been bolstered by the recent distribution of several billion dollars of Road Home grants from the U.S. Department of Housing and Urban Development to persons whose homes had been destroyed or damaged by Hurricane Katrina. Construction also contributed to growth in states such as New York, Texas and Washington State.
Although third quarter state personal income growth rates ranged from 0.8 percent to 3.6 percent, there was actually substantial uniformity in growth among most states. Excluding Washington state, the highest growth rate (in New Mexico) was only one half percentage point higher than the national average and the lowest growth rate (in Minnesota) was only six-tenths percentage point lower than the national average. Washington's unusually high growth rate is largely a consequence of stock grants in the information industry which boosted earnings in that industry 45 percent. Evidence has been accumulating over the last several years that this is a fairly predictable seasonal matter and BEA is planning to adopt new seasonal factors for that industry in the next quarterly state personal income release. Under a new compensation policy adopted in 2003, Microsoft has been granting large amounts of stock to employees in the third quarter of the year. The stock grants generally vest over a five year period. Previously, Microsoft rewarded employees with stock options in the second quarter of the year. The large earnings growth rate in Washington's information industry combined with the industry's large size, is reflected in its 2.2 percentage point contribution to the state's third quarter personal income growth rate and contrasts with the industry's mere 0.1 percentage point contribution to national personal income growth.
NOTE.–Quarterly estimates are expressed at seasonally adjusted annual rates, unless otherwise specified. Quarter–to–quarter dollar changes are differences between published estimates. Quarter–to–quarter percent changes are calculated from unrounded data and are not annualized.
Personal income is the income received by all persons from all sources. Personal income is the sum of net earnings by place of residence, rental income of persons, personal dividend income, personal interest income, and personal current transfer receipts. Net earnings is earnings by place of work (the sum of wage and salary disbursements (payrolls), supplements to wages and salaries, and proprietors' income) less contributions for government social insurance, plus an adjustment to convert earnings by place of work to a place–of–residence basis. Personal income is measured before the deduction of personal income taxes and other personal taxes and is reported in current dollars (no adjustment is made for price changes).
The estimate of personal income in the United States is derived as the sum of the state estimates; it differs from the estimate of personal income in the national income and product accounts (NIPAs) because of differences in coverage, in the methodologies used to prepare the estimates, and in the timing of the availability of source data.
BEA groups all 50 states and the District of Columbia into eight distinct regions for purposes of data collecting and analyses: New England (Connecticut, Maine, Massachusetts, New Hampshire, Rhode Island, and Vermont); Mideast (Delaware, District of Columbia, Maryland, New Jersey, New York, and Pennsylvania); Great Lakes (Illinois, Indiana, Michigan, Ohio, and Wisconsin); Plains (Iowa, Kansas, Minnesota, Missouri, Nebraska, North Dakota, and South Dakota); Southeast (Alabama, Arkansas, Florida, Georgia, Kentucky, Louisiana, Mississippi, North Carolina, South Carolina, Tennessee, Virginia, and West Virginia); Southwest (Arizona, New Mexico, Oklahoma, and Texas); Rocky Mountain (Colorado, Idaho, Montana, Utah, and Wyoming); and Far West (Alaska, California, Hawaii, Nevada, Oregon, and Washington).
BEA's national, international, regional, and industry estimates; the Survey of Current Business; and BEA news releases are available without charge on BEA's Web site at www.bea.gov/newsreleases/rels.htm. By visiting the site, you can also subscribe to receive free e–mail summaries of BEA releases and announcements.
Next state personal income release – March 27, 2008, at 8:30 A.M. ET for state personal income, fourth quarter 2007, annual 2007, and quarterly and annual revisions 2004–06.