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STATE PERSONAL INCOME: THIRD QUARTER 1998

Four western states -- Nevada, Colorado, Washington, and Arizona -- led the nation in personal income growth in the third quarter of 1998, according to estimates released by the Commerce Department's Bureau of Economic Analysis. In all four states, fast growth in net earnings (see Definitions on page 4) contributed to personal income growth.

For the nation, personal income grew 1.1 percent in the third quarter of 1998, the same rate as in the second quarter. By region, personal income growth accelerated in the third quarter in the Far West, Rocky Mountain, Great Lakes, and Southwest regions and decelerated in the Southeast, New England, Mideast, and Plains regions.

Forty-eight states and the District of Columbia had growth rates in personal income in the third quarter that were above the 0.3-percent increase in prices paid by U.S. consumers (as measured by the price index for personal consumption expenditures). Personal income declined in Montana and grew only 0.1 percent in Indiana.

Fastest growing states

In the third quarter of 1998, the four states with the fastest growth in personal income were Nevada (1.9 percent), Colorado (1.7 percent), Washington (1.6 percent), and Arizona (1.6 percent).

Net earnings contributed more to personal income growth in these four states than did transfer payments or dividends, interest, and rent (see table 1, contribution to percent change in personal income).

                                                                     Fastest growing states
                -------------------------------- percent change from second quarter 1998 to third quarter 1998 ------------------------
                            Divi-                                                       Transpor-                 Finance,
                           dends,   Transfer           Earnings           Con-    Manu-  tation &  Whole-        insurance,
                Personal  interest,   pay-     Net     by place          struc-  factu-  public    sale   Retail  & real   Ser- Govern-
                 income    & rent    ments  earnings  of work/1/  Farms   tion    ring  utilities  trade   trade  estate  vices   ment
                ------- by place of residence ------  ---------------------------- earnings by place of work --------------------------

United States..    1.1      0.8      0.6       1.3       1.3      -4.8     2.0     0       0.8      1.4     1.6    1.7     2.2     1.0

Nevada.........    1.9      1.5       .4       2.3       2.3       1.9     4.0     -.2     1.3      1.6     2.2    2.3     2.4     2.7
Colorado.......    1.7      1.1       .6       2.0       2.0       1.1     2.8     -.7     2.7      2.3     2.7    2.8     2.6     1.5
Washington.....    1.6       .9       .8       2.0       2.0       2.5     2.3     1.8     1.4      2.5     1.9    2.3     2.5     1.3
Arizona........    1.6      1.1       .5       2.0       2.0     -11.0     3.2     2.7     1.7      2.6      .9    2.0     2.6     1.0
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  1. Also includes mining and agricultural services, forestry, and fishing.

By industry, earnings in services was the major contributor to growth in earnings by place of work in all four fastest growing states. In addition:

• In Nevada, earnings in construction and government contributed substantially to growth in earnings by place of work; the rapid growth in construction earnings reflected the building of new hotels and casinos.
• In Colorado, earnings in retail trade and in transportation and public utilities contributed substantially to growth in earnings by place of work.
• In Washington and Arizona, manufacturing earnings contributed substantially to growth in earnings by place of work.

Slowest growing states

In the third quarter of 1998, the four states with the slowest growth in personal income were Montana (-0.7 percent), Indiana (0.1 percent), South Dakota (0.4 percent), and Iowa (0.4 percent).

In Montana and Indiana, the decline or slow growth in personal income reflected declines in net earnings; in South Dakota and Iowa, the slow growth in personal income reflected small increases in net earnings.

                                                                     Slowest growing states
                -------------------------------- percent change from second quarter 1998 to third quarter 1998 ------------------------
                            Divi-                                                       Transpor-                 Finance,
                           dends,   Transfer           Earnings           Con-    Manu-  tation &  Whole-        insurance,
                Personal  interest,   pay-     Net     by place          struc-  factu-  public    sale   Retail  & real   Ser- Govern-
                 income    & rent    ments  earnings  of work/1/  Farms   tion    ring  utilities  trade   trade  estate  vices   ment
                ------- by place of residence ------  ---------------------------- earnings by place of work --------------------------

United States..    1.1      0.8      0.6       1.3       1.3      -4.8     2.0     0       0.8      1.4     1.6    1.7     2.2     1.0

Montana........    -.7       .7       .5      -1.5      -1.5       1.6      .4   -23.8    -1.7      1.6     1.1    1.4     1.7     0
Indiana........     .1       .8       .9       -.3       -.4      -4.5    -1.1    -2.7     -.4      1.4     1.5    2.0     1.1     -.1
South Dakota...     .4       .7       .7        .2        .3      -6.5     -.5     2.8      .5     -1.1     2.3   -5.9     1.7     -.2
Iowa...........     .4       .5       .5        .3        .4     -12.6     1.4     -.1      .8       .7     1.3    1.7     2.0      .4
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  1. Also includes mining and agricultural services, forestry, and fishing.

By industry, in Montana and Indiana, declines in earnings by place of work mainly reflected declines in manufacturing earnings; in South Dakota and Iowa, slow growth in earnings by place of work mainly reflected declines in earnings in farms, as a result of declines in cash receipts from crops.

• In Montana, the decline in manufacturing earnings reflected an unusually high level in the second quarter, when large lump-sum payments were made to employees in the primary metal industries to settle a lawsuit. Earnings also declined in transportation and public utilities.
• In Indiana, the decline in manufacturing earnings reflected the effects of a strike in the motor vehicle industry in the second and third quarters of 1998. Earnings also declined in farms, construction, government, and transportation and public utilities.

Contributions to change

In the third quarter of 1998, U.S. personal income increased $78.9 billion. By type of income, most of the increase was accounted for by a $62.1 billion increase in net earnings. Dividends, interest, and rent increased $9.7 billion, and transfer payments increased $7.2 billion.

By region, the Southeast region accounted for the largest share (22.1 percent) of the increase in U.S. personal income. The increase in the Southeast was largely accounted for by Florida, Virginia, North Carolina, and Georgia.

Among states, California accounted for the largest share (15.2 percent) of the increase in U.S. personal income in the third quarter of 1998.

Earnings by place of work increased in all major industries except farms and manufacturing. Earnings in services contributed the most to the growth in earnings by place of work.

Definitions

Personal income is the income received by all persons from participation in production, from government and business transfer payments, and from government interest. Personal income is the sum of net earnings by place of residence, rental income of persons, personal dividend income, personal interest income, and transfer payments. Net earnings is earnings by place of work -- the sum of wage and salary disbursements (payrolls), other labor income, and proprietors' income -- less personal contributions for 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 for 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 (NIPA's) because of differences in coverage, in the methodologies used to prepare the estimates, and in the timing of the availability of source data.

Private goods-producing industries are defined to consist of farms; agricultural services, forestry, and fishing; mining; construction; and manufacturing. Private services-producing industries are defined to consist of transportation and public utilities; wholesale trade; retail trade; finance, insurance, and real estate; and "services."

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BEA's major national, regional, international, and industry estimates; the Survey of Current Business; and BEA news releases are available on BEA's web site:

STAT-USA maintains an electronic bulletin board (EBB) and an Internet site, which contain BEA estimates, BEA news releases, and the Survey of Current Business. To subscribe to STAT-USA's World Wide Web system, go to: http://www.stat-usa.gov. Subscriptions for single-user unlimited access to STAT-USA's Internet information are $50.00 for 3 months or $150.00 for 1 year. For further information, call (202) 482-1986.

Summary BEA estimates are available on recorded messages at the time of public release at the following telephone numbers:

(202) 606-5306 Gross domestic product 606-5303 Personal income and outlays 606-5362 Summary of international transactions

Most of BEA's estimates and analyses appear in the Survey of Current Business, BEA's monthly journal. The printed Survey of Current Business is available from the Superintendent of Documents, U.S. Government Printing Office, Washington D.C. 20402. First class mail: Annual subscription $88.00 domestic. Second class mail: Annual subscription $39.00 domestic, $48.75 foreign; single issue $14.00 domestic, $17.50 foreign.

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Scheduled release dates for 1999:

• State Personal Income, 4th quarter 1998 and Per Capita Personal Income, 1998 (preliminary).................. April 27 (Tuesday)
• Metropolitan Area Personal Income, 1997 .......................... May 6 (Thursday)
• Gross State Product, 1995-97 ..................................... June 7 (Monday)
• State Personal Income, 1st quarter 1999 .......................... July 27 (Tuesday)
• State Personal Income, 2nd quarter 1999 .......................... October 26 (Tuesday)

Note: BEA has rescheduled the annual revision of state personal income and state per capita personal income estimates for 1996-98 in order to combine it with the comprehensive revision, which will be released in the spring of 2000. For further information about the schedule change, see the upcoming article, "Personal Income by State and Region, Third Quarter 1998," Survey of Current Business 79 (February 1999).