Since the Great Recession, the economy’s slow recovery has played out unevenly across states. Growth over the past decade has been fastest in North Dakota, where the combined personal income of its residents has risen at six times the rate of last-place Connecticut. However, North Dakota was one of a handful of states where personal income growth—a measure of the economy—contracted in late 2017 and early 2018, even as the U.S. pace accelerated.
Even with the recent uptick, personal income growth nationally has been off its historical pace. Since the economic downturn began in the fourth quarter of 2007, U.S. personal income rose by the equivalent of 1.6 percent a year through the first quarter of 2018, compared with the equivalent of 2.6 percent a year over the past 30 years, after accounting for inflation. The rates represent the constant pace at which inflation-adjusted state personal income would need to grow each year to reach the most recent level.
After tumbling nationwide except in West Virginia during the depths of the recession, personal income totals have recovered in all states but at far different rates.
Only two states’ growth since the start of the recession beat the 30-year U.S. pace: North Dakota, where the sum of residents’ personal income has increased the equivalent of 3.6 percent a year, and Utah, where its sum rose the equivalent of 2.7 percent a year. In the 11 states slowest to recover, the rate of expansion over the past 10-plus years has been less than 1 percent a year.
States widely shared in the latest expansion after nearly two years of slower growth, during which personal income declined in more than half of the states at some point. In the first quarter of 2018, personal income estimates for just four states—including North Dakota—fell from a year earlier, and just five states had year-over-year drops in the previous quarter. Growth in total personal income nationally was 1.7 percent in the first quarter of 2018 compared with a year earlier, and 2.1 percent in the previous quarter from a year earlier—the fastest rates since the end of 2015, though still below a peak of 4.7 percent in 2014. These results are based on estimates and subject to revision, as is Pew’s ranking of growth rates for state personal income.
Personal income estimates are widely used to track state economic trends. 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 and property income, as well as benefits provided by employers or the government, such as Social Security checks and Medicaid and Medicare coverage. Trends in personal income matter to state governments because tax revenue and spending demands may rise or fall along with residents’ incomes. However, these statewide sums are aggregates, and should not be used to describe trends for individuals and households.
The constant annual growth rate for each state’s aggregate, inflation-adjusted personal income since the fourth quarter of 2007 (when the 2007-09 recession began) to the first quarter of 2018 shows:
Estimated change in each state’s aggregate, inflation-adjusted personal income in the first quarter of 2018 from a year earlier (subject to data revisions) shows:
Use of constant annual growth rates allows comparisons of states’ economic performance since the recession, which lasted from December 2007 to June 2009. However, personal income did not actually change at a steady pace, instead falling in some years and rising in others.
Viewed by calendar year, inflation-adjusted personal income fell in just five states in 2008 but in 49 in 2009, with West Virginia the only state to escape the 18-month recession without a calendar-year drop. Personal income totals rebounded until 2013, when rates fell in 36 states, in part because expiring tax breaks motivated some taxpayers to accelerate income into the previous year. Weak earnings in industries such as farming and energy weighed down personal income and helped account for declines in 11 states in 2016 and nine in 2017.
Over the past decade, Delaware and Kansas have endured the most frequent drops. Personal income fell in five of the 10 years. However, Delaware’s drops were mostly in the first half, while three decreases for Kansas occurred in the most recent five years. The fewest decreases—in one of 10 years—were in Colorado, Idaho, Illinois, New York, Oregon, Utah, Vermont, and Washington. Their personal income fell in 2009.
North Dakota is the only state where personal income has declined in each of the past three years, and five other states’ personal income fell in each of the past two years: Alaska, Connecticut, Iowa, Kansas, and South Dakota.
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. Personal income excludes capital gains.
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.
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. So can looking at household data, which are based on a different measure of income.
Download the data to see state-by-state growth rates for personal income from 2007 through the first quarter of 2018. Visit Pew’s interactive resource Fiscal 50: State Trends and Analysis to sort and analyze data for other indicators of state fiscal health.