WASHINGTON DC, September 18, 2008 - U.S. personal income grew 1.8 percent in the second quarter of 2008 with growth accelerating in all but five states, according to statistics released today by the U.S. Bureau of Economic Analysis. The second-quarter growth was the highest since the first quarter of 2007 and more than double the 0.8 percent pace of the first quarter of 2008. Almost all (0.9 percentage point) of the acceleration is accounted for by the cash rebates taxpayers received from the federal government this spring under the provisions of the Economic Stimulus Act of 2008.
Net earnings grew 0.8 percent nationally in the second quarter, up from 0.7 percent growth in the first; property income grew 0.2 percent after falling 0.1 percent in the first quarter; and transfer receipts (in which the economic stimulus payments are recorded) grew 8.3 percent, up from 2.3 percent growth in the first quarter of 2008.
Earnings in the professional services, state and local government, and health care industries were the largest contributors (of the 24 industries tracked by BEA on a quarterly basis) to personal income growth in the second quarter, together contributing 0.4 percentage point, while lower earnings in construction and retail trade reduced personal income growth by a combined 0.1 percentage point.
Southeast Region. The 12-state Southeast Region grew significantly faster than the national average in the second quarter with most of the above average growth accounted for by economic stimulus payments. Personal income in the Southeast grew 2.2 percent including the stimulus payments and 0.8 percent without. Since the income tax rebates were targeted to lower income families, they had their greatest impact in Mississippi (where they contributed 2.8 percentage points to personal income growth) and other lower income states such as Alabama, Louisiana, and Arkansas which are clustered in the Southeast. The impact was least in high-income states such as Connecticut and Massachusetts where the rebates contributed only 0.4 percentage point to personal income growth.
Texas. Net earnings—the component of personal income indicative of labor market conditions—has been notably resilient in Texas to the national slowdown of the last two quarters. Not only has net earnings in Texas grown at more than twice the national pace in the first two quarters of 2008, it remains at its average pace for the current economic expansion, which began in the first quarter of 2001.
The oil and gas industry is the primary propellant of personal income growth in Texas. In fact, earnings growth in just the mining and construction industries in Texas, $2 billion and $1 billion respectively, exceeded the total earnings growth in every other state except in California and New York (see table 2 for the dollar change in net earnings by state). Both construction and mining have grown uninterruptedly in Texas for the past two years. In contrast, construction has declined nationally in each of the last five quarters and mining has contributed almost nothing to US personal income growth.
Revisions. BEA also released today revised quarterly and annual state personal income beginning with the first quarter of 2005. Revisions are usually made each September to incorporate source data that are more complete and more detailed than previously available. The average revision to the 2007 personal incomes of the 50 states and the District of Columbia was 0.3 percentage point. A complete presentation and discussion of the data and revisions will be provided in the October issue of the Survey of Current Business.
Economic Stimulus Act of 2008
The Economic Stimulus Act of 2008 provided rebate payments to eligible taxpayers. The amount of the rebate was determined by information reported on federal income tax filings for 2007 and was based on filing status, level of adjusted gross income, and number of qualifying children. Rebates to taxpayers were $312 billion in the second quarter of 2008, the majority of which were sent during the initial round of payments, which began April 28, 2008. Additional rounds continued on a weekly basis through mid-July 2008.
In quarterly state personal income, rebates for individuals who pay no income taxes (or for whom the rebate would exceed the amount of the income taxes they do pay) are treated as personal current transfer receipts. These amounted to $113 billion in the second quarter of 2008. Rebates for individuals with tax liabilities that exceed the rebate amount, $199 billion, are treated as offsets to personal current taxes and raise disposable personal income. BEA publishes state personal current taxes and state disposable personal income only on an annual basis.
The national estimate of the portion of the rebate treated as a transfer was allocated to states in proportion to BEA's earned income tax credit statistics for 2007.
NOTE.— Quarter–to–quarter percent changes are calculated from unrounded data and are not annualized. Quarterly estimates are expressed at seasonally adjusted annual rates, unless otherwise specified. Quarter–to–quarter dollar changes are differences between published estimates.
Definitions
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. By visiting the site, you can also subscribe to receive free e–mail summaries of BEA releases and announcements.
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Next state personal income release – December 18, 2008, at 8:30 A.M. ET for state personal income, third quarter 2008.
