Total personal income growth over the year slowed in most states and stalled in a few as the coronavirus pandemic began to derail the economy. The first quarter of 2020 halted a historically long expansion in which North Dakota and Utah tied for the strongest growth since the Great Recession, as measured by increases in the sum of their residents’ personal income, and Illinois and Mississippi experienced the weakest recoveries.
The first quarter of 2020, the latest for which there is 50-state data, captured only the first few weeks of the COVID-19 pandemic and its devastating blow to economic activity. But a slowdown in the growth of state personal income was beginning to emerge as businesses shut down and unemployment started to escalate, a precursor to sharper economic disruptions that will be fully reflected in aggregate personal income data later this year. Nationally, total personal income rose 1.4% in the first quarter from a year earlier, the slowest rate since the end of 2016.
Since the Great Recession, total personal income bounced back in all states, although at different paces. After adjusting for inflation, North Dakota and Utah led all states with long-term growth rates equivalent to 3.3% a year since the fourth quarter of 2007, when the 18-month recession began. 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.
Across the country, mostly Western states recorded the strongest long-term personal income growth since the start of the Great Recession, with Washington (3.1%), Colorado (2.9%), and Texas (2.9%) rounding out the states with the fastest gains. The same states recorded among the sharpest long-term population gains, a trait typically associated with a strong labor force and economic expansion, with Utah leading the nation. These compound annual growth rates represent the pace at which state personal income dollars would need to grow each year to reach their current level, after accounting for inflation.
Every state’s personal income grew over the course of the past economic expansion. But total income for Illinois and Mississippi increased at the equivalent of only 1% a year, after adjusting for inflation. That was less than one-third of North Dakota and Utah’s growth, and the weakest growth rate of any state. Illinois’ and Mississippi’s expansion was constrained by weak job growth—one reason affecting personal income levels—as both states’ job totals changed little over the more than 10-year recovery.
Personal income sums up all the money and benefits that residents receive from work, certain investments, income from owning a business and property, as well as benefits provided by employers or the government, such as Social Security checks and Medicaid and Medicare coverage. Results for the first quarter of 2020 are based on estimates and subject to revision, as is Pew’s ranking of growth rates for state personal income.
A recap of trends in the constant annual growth rate for each state’s aggregate, inflation-adjusted personal income since the fourth quarter of 2007 (when the recession began) through the first quarter of 2020 shows:
The first quarter of 2020 was the last quarter to largely avoid the economic effects of the pandemic as shutdowns commenced only in its last few weeks. The estimated change in each state’s aggregate, inflation-adjusted personal income in the first quarter of 2020 from a year earlier (subject to data revisions) shows:
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. 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. In both 2018 and 2019, every state reported an increase in personal income, after adjusting for inflation, the only time since the recession began that there were no decreases for consecutive years.
Six states boast the fewest calendar-year decreases over the more than decade-long recovery: Colorado, Idaho, Illinois, Mississippi, Utah, and Washington. Their personal income fell just once, in 2009.
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 realized or unrealized capital gains, such as those from stock market investments.
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.
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 first quarter of 2020. Visit Pew’s interactive resource, “Fiscal 50: State Trends and Analysis,” to sort and analyze data for other indicators of state fiscal health.