State Personal Income, 1st quarter 2012-4th quarter 2012 and State Annual Personal Income, 2012 (preliminary estimates)

State Personal Income 2012

WASHINGTON DC, March 27, 2013 – Average state personal income growth slowed to 3.5 percent in 2012 from 5.2 percent in 2011, according to estimates released today by the U.S. Bureau of Economic Analysis. State personal income growth ranged from -0.2 percent in South Dakota to 12.4 percent in North Dakota. Inflation, as measured by the national price index for personal consumption expenditures, fell to 1.8 percent in 2012 from 2.4 percent in 2011.

South Dakota’s small personal income decline was due to the effect of last year’s drought on farm income. The drought also had relatively strong adverse effects in Nebraska, Kansas, and Iowa, all of which had below average total personal income growth in 2012. In contrast, nonfarm personal income growth in each of these states was above average.

For the fifth time in the last six years North Dakota has had the fastest personal income growth of all states. Since 2006, personal income in North Dakota has grown at a compound annual rate of 9.2 percent, substantially outpacing the 2.9 percent growth rate of all other states. In 2012, mining (including oil and gas extraction) and construction accounted for 43 percent of private nonfarm earnings growth in North Dakota.

Fourth quarter personal income.¹ In the fourth quarter of 2012, average state personal income growth accelerated to 1.9 percent from 0.6 percent in the third quarter, the fastest pace since the first quarter of 2011. Fourth-quarter growth ranged from 1.3 percent in West Virginia to 4.8 percent in South Dakota. The inflation rate was 0.4 percent in the fourth quarter of 2012, the same as in the third quarter.

Special or accelerated dividend payments to persons in anticipation of changes in federal individual income tax rates boosted personal dividend income in the fourth quarter. The gain was largest in Washington D.C. where dividend income rose 26 percent and smallest in South Dakota where it grew 12 percent.

Fourth-quarter earnings in the finance industry were also boosted by accelerated bonus payments or other irregular pay in anticipation of tax rate changes. Finance earnings grew 10.5 percent in New York, 7.9 percent in Connecticut, and 6.4 percent in New Jersey, states where the finance industry is particularly prominent. Finance earnings grew 2.7 percent in the other states.

Fourth-quarter wage and salary disbursements in New York and New Jersey were reduced 0.8 percent and 0.7 percent, respectively, to reflect work interruptions caused by Hurricane Sandy not accounted for in the primary source data used for preliminary state-level wage and salary estimates.

Severe heat and drought adversely affected agricultural production in the summer and fall of 2012. In the fourth quarter, the drought reduced farm inventories by $ 25 billion. Crop insurance indemnity payments offset $ 15 billion of the losses. Illinois and Indiana were hardest hit in the fourth quarter with farm income falling 28 percent and 13 percent (respectively).

For additional information, see the Technical Note on Quarterly State Personal Income for the Fourth Quarter of 2012 at www.bea.gov.

Revisions. Estimates for 2012:I to 2012:III have been revised. All of the regional statistics underlying this news release along with mapping and charting software are available at www.bea.gov/regional/.

¹NOTE.— Quarter-to-quarter percent changes are calculated from unrounded data and are not annualized. Quarterly estimates are expressed at seasonally adjusted annual rates, unless otherwise specified. Quarter-to-quarter dollar changes are differences between published estimates.

Definitions

Personal income is the income received by all persons from all sources. Personal income is the sum of net earnings by place of residence, property income, and personal current transfer receipts. Property income is rental income of persons, personal dividend income, and personal interest income. Net earnings is earnings by place of work (the sum of wage and salary disbursements, supplements to wages and salaries, and proprietors’ income) less contributions for government 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).

Per capita personal income is calculated as the total personal income of the residents of a state divided by the population of the state. In computing per capita personal income, BEA uses the Census Bureau’s annual midyear population estimates.

Disposable personal income is personal income less personal current taxes. It is the portion of personal income that is available for spending and saving.

The estimate of personal income in the United States is derived as the sum of the state estimates and the estimate for the District of Columbia; it differs from the estimate of personal income in the national income and product accounts (NIPAs) because of differences in coverage, in the methodologies used to prepare the estimates, and in the timing of the availability of source data.

BEA groups all 50 states and the District of Columbia into eight distinct regions for purposes of data collecting and analyses: New England (Connecticut, Maine, Massachusetts, New Hampshire, Rhode Island, and Vermont); Mideast (Delaware, District of Columbia, Maryland, New Jersey, New York, and Pennsylvania); Great Lakes (Illinois, Indiana, Michigan, Ohio, and Wisconsin); Plains (Iowa, Kansas, Minnesota, Missouri, Nebraska, North Dakota, and South Dakota); Southeast (Alabama, Arkansas, Florida, Georgia, Kentucky, Louisiana, Mississippi, North Carolina, South Carolina, Tennessee, Virginia, and West Virginia); Southwest (Arizona, New Mexico, Oklahoma, and Texas); Rocky Mountain (Colorado, Idaho, Montana, Utah, and Wyoming); and Far West (Alaska, California, Hawaii, Nevada, Oregon, and Washington).

State personal income statistics provide a framework for analyzing current economic conditions in each state and can serve as a basis for decision making. For example:

• Federal government agencies use the statistics as a basis for allocating funds and determining matching grants to states. The statistics are also used in forecasting models to project energy and water use.


• State governments use the statistics to project tax revenues and the need for public services.


• Academic regional economists use the statistics for applied research.


• Businesses, trade associations, and labor organizations use the statistics for market research.

BEA’s national, international, regional, and industry estimates; the Survey of Current Business; and BEA news releases are available without charge on BEA’s Web site at www.bea.gov. By visiting the site, you can also subscribe to receive free e-mail summaries of BEA releases and announcements.

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Next state personal income release – June 28, 2012, at 8:30 A.M. for state personal income, first quarter 2013.

U.S. Bureau of Economic Analysis

State Personal Income, 1st quarter 2012-4th quarter 2012 and State Annual Personal Income, 2012 (preliminary estimates)

Jobs +88,000, Unemployment Rate 7.6%, Household Survey Employment Drops by 206,000

Initial Reaction

The surge in employment fueled by part-time jobs and the Obamacare effect may finally be over. Although the establishment survey showed a gain of 88,000 jobs, the household survey, off which the unemployment rate is based, showed a loss of 206,000 jobs.

The unemployment rate edged lower by .1% because a whopping 496,000 people dropped out of the labor force.

Last month, voluntary part-time employment rose by a reported 446,000. It’s plain to see that last month’s numbers were a statistical aberration. This was a miserable jobs report from every angle.

March BLS Jobs Report at a Glance

• Payrolls +88,000 – Establishment Survey


• US Employment -206,000 – Household Survey


• US Unemployment -290,000 – Household Survey


• Involuntary Part-Time Work -230,000 – Household Survey;


• Voluntary Part-Time Work -163,000 – Household Survey


• Baseline Unemployment Rate -.01 – Household Survey


• U-6 unemployment -.05 to 13.8% – Household Survey


• The Civilian Labor Force -496,000 – Household Survey


• Not in Labor Force +663,000 – Household Survey


• Participation Rate -.02 to 63.3 – Household Survey

Recall that the unemployment rate varies in accordance with the Household Survey not the reported headline jobs number, and not in accordance with the weekly claims data.

Quick Notes About the Unemployment Rate

• In the last year, those “not” in the labor force rose by 2,069,000


• Over the course of the last year, the number of people employed rose by 1,266,000


• In the last year the number of unemployed fell from 12,686,000 to 11,742,000 (a drop of 944,000)


• Long-Term unemployment (27 weeks and over) was 4,611,000 – a decline of 186,000 from last month’s total of was 4,797,000


• Percentage of long-term unemployment is 39.6%. It has been hovering near 40% for at least a year. Once someone loses a job it is still very difficult to find another.

March 2013 Jobs Report

Please consider the Bureau of Labor Statistics (BLS) March 2013 Employment Report.

Nonfarm payroll employment edged up in March (+88,000), and the unemployment rate was little changed at 7.6 percent, the U.S. Bureau of Labor Statistics reported today. Employment grew in professional and business services and in health care but declined in retail trade.

Click on Any Chart in this Report to See a Sharper Image

Unemployment Rate – Seasonally Adjusted

Month to Month Change by Type of Job

Average weekly hours rose .1 to at 34.6 hours. A year ago average hours were 34.5 hours. Average hourly earnings rose $ 0.01 to $ 23.83.
In 2013, average hourly earnings are up $ 0.05.
Real wages have been declining. Add in increases in state taxes and the average Joe has been hammered pretty badly. For 2013, one needs to factor in the increase in payroll taxes for Social Security.

For further discussion of income distribution, please see What’s “Really” Behind Gross Inequalities In Income Distribution?

BLS Birth-Death Model Black Box

The BLS Birth/Death Model is an estimation by the BLS as to how many jobs the economy created that were not picked up in the payroll survey.

The Birth-Death numbers are not seasonally adjusted, while the reported headline number is. In the black box the BLS combines the two, coming up with a total.

The Birth Death number influences the overall totals, but the math is not as simple as it appears. Moreover, the effect is nowhere near as big as it might logically appear at first glance.

Do not add or subtract the Birth-Death numbers from the reported headline totals. It does not work that way.

Birth/Death assumptions are supposedly made according to estimates of where the BLS thinks we are in the economic cycle. Theory is one thing. Practice is clearly another as noted by numerous recent revisions.

Birth Death Model Adjustments For 2012

Birth Death Model Adjustments For 2013

Birth-Death Notes

Once again: Do NOT subtract the Birth-Death number from the reported headline number. That approach is statistically invalid.

In general, analysts attribute much more to birth-death numbers than they should. Except at economic turns, BLS Birth/Death errors are reasonably small.

For a discussion of how little birth-death numbers affect actual monthly reporting, please see BLS Birth/Death Model Yet Again.

Household Survey Data

Decline in Labor Force Factors

1. Discouraged workers stop looking for jobs


2. People retire because they cannot find jobs


3. People go back to school hoping it will improve their chances of getting a job


4. People stay in school longer because they cannot find a job

Were it not for people dropping out of the labor force, the unemployment rate would be well over 10%.

Part Time Status (in Thousands)

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There are 7,638,000 workers who are working part-time but want full-time work. A year ago there were 7,664,000. There has been no improvement in a year. This is a volatile series.

Table 15 BLS Alternate Measures of Unemployment

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Table A-15 is where one can find a better approximation of what the unemployment rate really is.

Notice I said “better” approximation not to be confused with “good” approximation.

The official unemployment rate is 7.6%. However, if you start counting all the people who want a job but gave up, all the people with part-time jobs that want a full-time job, all the people who dropped off the unemployment rolls because their unemployment benefits ran out, etc., you get a closer picture of what the unemployment rate is. That number is in the last row labeled U-6.

U-6 is much higher at 13.8%. Both numbers would be way higher still, were it not for millions dropping out of the labor force over the past few years.

Duration of Unemployment

Long-term unemployment remains in a disaster zone with 39.6% of the unemployed in the 27 weeks or longer category.

Grossly Distorted Statistics

Given the complete distortions of reality with respect to not counting people who allegedly dropped out of the work force, it is easy to misrepresent the headline numbers.

Digging under the surface, much of the drop in the unemployment rate over the past two years is nothing but a statistical mirage. Things are much worse than the reported numbers indicate.

Mike “Mish” Shedlock
http://globaleconomicanalysis.blogspot.com

Mike “Mish” Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.

Mish’s Global Economic Trend Analysis

Jobs +88,000, Unemployment Rate 7.6%, Household Survey Employment Drops by 206,000