Federal Aid Boosts Personal Income in Farm States

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Federal Aid Boosts Personal Income in Farm States

Note: These data have been updated. To see the most recent data and analysis, visit Fiscal 50.

Agricultural states received an economic boost in the third quarter of 2019 after the federal government resumed special assistance payments to farmers amid ongoing trade disputes. States in the Farm Belt and the West recorded the highest growth in the combined personal income of their residents over the past year. However, most farm states still trailed national personal income gains since the Great Recession began.

For the third quarter in a row, all states experienced inflation-adjusted increases in the sum of personal income received by their residents compared with a year earlier. Federal subsidies for farmers hurt by retaliatory tariffs resumed in August. Although farmers in every state received payments, some states benefited far more than others.

Iowa—where farmers received more dollars from the Agriculture Department’s Market Facilitation Program than those in any other state—registered the fastest inflation-adjusted personal income growth over the past year, at 4.6 percent, compared with U.S. personal income growth of 2.7 percent. North Dakota, South Dakota, and Texas, which also benefited from significant farm subsidies, similarly recorded among the strongest year-over-year total personal income gains. Other top states were mostly concentrated in the West: Arizona, California, Colorado, Idaho, New Mexico, Utah, and Washington, with Arkansas rounding out the group.

Personal income sums up all the money and benefits that residents receive from work, certain investments, and other sources, such as government benefits. State personal income, a measure used to assess economic trends, matters to state governments because tax revenue and spending demands may rise or fall along with residents’ incomes.

Farmers confronted a number of challenges in 2019: tariffs on U.S. agricultural exports imposed by China and other countries hit by President Trump’s trade sanctions, heavy rains that delayed planting, and depressed prices for select commodities. To help offset the trade conflicts’ effects on farmers, the Trump administration in 2019 authorized up to $14.5 billion in payments from the Market Facilitation Program on top of $8.6 billion distributed in 2018. The aid helped prop up total farm income to the highest level nationally in nearly four years when adjusted for inflation.

Seventeen states recorded farm income up more than 50 percent from averages over the previous four quarters, after adjusting for inflation. Elsewhere, the temporary aid did less to raise incomes as the $5.5 billion distributed from the Market Facilitation Program in the third quarter accounted for just over 6 percent of aggregate farm income nationally. Agriculture Department figures suggest only about half of program funding was distributed in the third quarter, with additional payments issued in the fourth quarter not yet reflected in the income data.

Since the recession began in late 2007, oil-rich North Dakota and primarily Western states have enjoyed the strongest growth in the sum of all personal income received by their residents. Many of those states also gained residents the fastest over the past decade, a trait associated with a strong labor force and economic expansion.

While North Dakota led all states, with a long-term growth rate equivalent to 3.5 percent a year, Mississippi recorded the weakest recovery since the start of the recession, with an inflation-adjusted growth rate equivalent to 1 percent a year. 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.

Nationally, growth in total personal income since the recession began has been off its historic pace, rising the equivalent of 2.1 percent a year compared with the equivalent of 2.7 percent over the past 30 years, after accounting for inflation.

Wages and salaries account for about half of personal income, while the rest is from other 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. State personal income does not include realized or unrealized capital gains, such as those from stock market investments. These statewide sums are aggregates and should not be used to describe trends for individuals and households.

Results for the third quarter of 2019 are based on estimates and subject to revision, as is Pew’s ranking of growth rates for state personal income.

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Growth since the start of the recession

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 third quarter of 2019 shows:

  • North Dakota has experienced the strongest annualized growth (3.5 percent) since the start of the recession. Its biggest gains occurred after new fracking technology led to an oil boom shortly before the Great Recession began, and more recently, growth has fluctuated with the price of oil.
  • The next-largest growth rates since late 2007 were concentrated in the West: Utah (3.3 percent), Washington (3.2 percent), Colorado and Texas (both 3 percent), California (2.8 percent), and Idaho and Oregon (both 2.7 percent).
  • Mississippi’s inflation-adjusted growth was the weakest of any state, the equivalent of 1 percent a year since the end of 2007. One culprit is the state’s lagging construction industry, as employment has mostly trended downward over the past decade.
  • The other slowest-growing states were Connecticut and Illinois (both 1.1 percent) and Louisiana, Rhode Island, and West Virginia (each 1.2 percent).

Growth over the past year

Estimated change in each state’s aggregate, inflation-adjusted personal income in the third quarter of 2019 from a year earlier (subject to data revisions) shows: 

  • Nationally, total personal income rose 2.7 percent in the third quarter of 2019 compared with a year earlier, below its post-recession peak of 5.3 percent growth at the start of 2011.
  • Midwestern and Western states recorded most of the strongest gains. Those with the strongest growth over the past year include Iowa (4.6 percent), Idaho (4.3 percent), Utah (4.2 percent), South Dakota (3.9 percent), North Dakota and Washington (both 3.8 percent), Arizona and California (both 3.6 percent), Colorado (3.5 percent), and Arkansas, New Mexico, and Texas (3.3 percent).
  • The slowest growth was in West Virginia (0.2 percent), Illinois (1.2 percent), and Connecticut and Hawaii (both 1.3 percent).
  • Alabama, Arkansas, Indiana, Mississippi, Missouri, and North Carolina all recorded their strongest quarter of growth in more than two years. Indiana and Missouri were among the top recipients of temporary assistance for farmers.

Ups and downs since recession

This analysis’ 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 seven states in 2008 but in 49 states in 2009—all except Delaware, according to the most recent data that was revised back to 1998 No state escaped the 18-month recession without a calendar-year drop. The country rebounded over the next three years until 2013, when personal income fell in 38 states, in part because many taxpayers shifted the timing of income in reaction to federal tax changes. Weak earnings in industries such as farming and energy weighed down personal income and helped account for declines in 11 states in 2016. Every state had an increase in total personal income in 2018, just the third time that has happened since the onset of the recession.

Six states boast the fewest decreases over the 11 years: Colorado, Idaho, Illinois, Mississippi, Utah, and Washington. Their personal income fell just once, in 2009.

What is personal income?

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. Likewise, growth in total state personal income should not be seen as a measure of how much the income of average residents has changed. Other measures should be used to approximate income growth for individuals, such as state personal income per capita or household income based on different data.

Looking at state gross domestic product, which measures the value of all goods and services produced within a state, would yield different insights on state economies.

Download the data to see state-by-state growth rates for personal income from 2007 through the third quarter of 2019. Visit Pew’s interactive resource Fiscal 50: State Trends and Analysis to sort and analyze data for other indicators of state fiscal health.

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