One of the longest U.S. economic expansions has lifted personal income in all states above pre-recession levels. But growth has varied, ranging from a constant annual rate of 0.8 percent in Illinois and Nevada to 4.5 percent in North Dakota. In the fourth quarter of 2016, year-over-year personal income growth weakened to the slowest pace in three years, due partly to ongoing weakness in energy and farm earnings.
Since the recession began, national growth in personal income has been slower than its historical pace. Estimated U.S. personal income increased by the equivalent of 1.7 percent a year from the fourth quarter of 2007 through the fourth quarter of 2016, compared with the equivalent of 2.7 percent a year over the past 30 years, after accounting for inflation.
States have recovered at different paces. Only in mid-2015 did the final state—Nevada—recoup its personal income losses and return to its pre-recession level, after accounting for inflation. Since the end of 2007, personal income in 18 states has grown faster than that of the nation as a whole.
Looking at recent trends, inflation-adjusted U.S. personal income rose by 2.1 percent in the fourth quarter of 2016 from a year earlier—the leanest one-year rate since the end of 2013, when personal income contracted, according to preliminary data. Personal income growth in 17 states outpaced the U.S. rate for the year that ended in the fourth quarter of 2016. Elsewhere, personal income fell in five states, as residents’ earnings dropped because of lingering weakness in the farm and mining industries. These results are based on estimates and subject to revision, as is Pew’s ranking of state growth rates.
Personal income estimates are widely used to track state economic trends. Trends in personal income matter not only for individuals and families but also for state governments, because tax revenue and spending demands may rise or fall along with residents’ incomes. Comprising far more than simply employees’ wages, the measure sums up all sorts of income received by state residents, such as earnings from owning a business or investing, as well as benefits provided by employers or the government.
Personal income has fluctuated since the recession, which lasted from December 2007 to June 2009. Growth in each calendar year shows the variation that occurred from 2007 to 2016. (See the “Year by year” tab for annual results in each state between calendar years 2007 and 2016.) By contrast, constant annual rates show the steady pace that income would have to rise each year to reach its latest level.
Personal income sums up residents’ paychecks, Social Security benefits, employers’ contributions to retirement plans and health insurance, income from rent and other property, and benefits from public assistance programs such as Medicare and Medicaid, among other items.
Federal officials use state personal income to determine how to allocate support to states for certain programs, including funds for Medicaid. State governments use personal income statistics to project tax revenue for budget planning, set spending limits, and estimate the need for public services.
Growth in personal income should not be interpreted solely as wage growth; wages and salaries account for about half of U.S. personal income. Personal income also differs from income measured at the household level.
Looking at personal income per capita or state gross domestic product, which measures the value of all goods and services produced within a state, can yield different insights on state economies.
Download the data to see state-by-state growth rates for personal income from 2007 through the fourth quarter of 2016. Visit Pew’s interactive resource Fiscal 50: State Trends and Analysis to sort and analyze data for other indicators of state fiscal health.