Personal income growth in Arkansas accelerated ahead of most of the nation in the second quarter as oversized earnings from the Natural State’s volatile farming sector boosted contributions to the net state earnings.
According to the latest estimates released Tuesday by the U.S. Bureau of Economic Analysis (BEA), state personal income grew at an annual rate of 5.1% for the three-month period ended June 30, lifting Arkansas to a 7th-place ranking among the 50 states and the District of Columbia. Arkansas’ personal income gains were well above the national average in 2017 as U.S. earnings grew only at 4.2% in the second quarter, down from 5% in the first quarter.
Gov. Asa Hutchinson told Talk Business & Politics said he hopes to continue building on the momentum of growing the state’s job market.
“From my first day in office when I called the leaders of several companies and encouraged them to consider locating or expanding in the state, job creation has remained the top priority of this administration,” said Hutchinson. “Our focus is not creating any job, but good paying jobs that make a difference in the lives of Arkansans. The fact that Arkansas ranks as a top ten state in personal income growth shows our growth strategy is working. I look forward to continuing to build on this momentum.”
Overall, U.S. personal income growth in real dollars was up slightly to nearly $17.5 trillion, compared to $17.3 trillion in the previous quarter and an increase of 4.8% over $16.7 trillion a year ago.
U.S. economists, including members of the Federal Reserve’s Open Market Committee, watch personal income growth as a key indicator of the nation’s economic health. Not to be confused with U.S. payrolls, personal income consists of an individual’s total earnings from wages, investments and other ventures such as rent receipts. It is the sum of all the incomes received by all the individuals or households during a given period, such as a fiscal year or quarter.
In Arkansas, state personal income increased at an annual rate of 2.5% in the first quarter of 2018, after remaining flat for most of 2017. Among other major components, wage and salary growth, plus supplements, grew slightly faster in Arkansas than the U.S. average. Proprietors’ income in Arkansas was boosted by a 111% spike in farm proprietors’ earnings, however, nonfarm proprietors’ income rose at a rate of only 4.5% — matching the nationwide average.
Growth in state dividends, interest and rent at 3.7% exceeded the U.S. growth rate at 3.3%, while personal current transfer receipts in Arkansas grew at a slightly slower rate of 3.9% compared to 4.1% for the rest of the nation.
“Percent changes from quarter to quarter can be quite volatile, so a better measure of longer term growth trends is the percentage change from a year earlier. By this measure, from (a year ago), Arkansas personal income increased 4.3%, compared to an gain of 4.6% nationwide,” said Michael Pakko, economist at the University of Arkansas at Little Rock.
In actual dollars, personal income growth for Arkansas earnings grew 4.8% to $128.2 billion, up from $122.3 billion in 2017. That amounts to $42,733 in earnings for each of the three million residents in the Natural State, up from $40,791 a year ago. Last year, Arkansas topped 3 million in population for the first time in the state’s history, according to Census Bureau estimates.
The Southeast region, which includes Arkansas and 11 other states, led U.S. regional personal income growth at $3.93 trillion, up from $3.76 trillion a year ago. The 12-state region’s overall growth held at a strong 4.5% in the second quarter, meaning that each of the 84 million people in the nation’s fastest growth area earned an average $46,785 per resident.
By industry, Arkansas’ farming sector was the biggest earnings contributors at a whopping 1.05%, nearly triple the growth of all other sectors. Professional scientific and technical services and healthcare and social assistance were the other key advancers at 0.36% and 0.35%, respectively.
On his “Arkansas Economist” blog, Pakko noted that Arkansas was one of nine states where the volatile farm earnings component contributed one-half a percentage point or more to increases in personal income.
“At a 91% annualized growth rate, farm income actually contributed over a full percentage point to Arkansas’ personal income growth,” said Pakko, director of UALR’s Economic Development Institute. “Excluding farm income, Arkansas incomes expanded at a 4.1% rate, slightly higher than the 4.0% national average.”
Other sectors that saw net earnings growth were administration support and waste management services, manufacturing, wholesale and retail trades, and state and local government. Information and arts and entertainment were the only sectors to lose ground at 0.1% growth in personal income.
Nationally, the percent change in personal income across all states ranged from 6% in Texas to 1.6% in Washington state. Earnings were the leading contributor to personal income growth in most states, including the four states with the fastest personal income growth — Texas, Louisiana, Kentucky, and North Dakota.
U.S. earnings increased fastest in farming and mining, although neither industry contributed more than 0.2 of a percentage point to personal income growth nationally. However, both industries were important contributors to growth in several states, including Arkansas.
Property income, another component of personal income, increased 3.3% in the second quarter of 2018, after increasing 3.6% in the first quarter. Growth rates ranged from a high of 3.7% in Arkansas to 2.9% in the District of Columbia. Transfer receipts increased 4.1% in the second quarter of 2018, after increasing 6.6% in the first quarter. Growth rates ranged from 9.4% in Connecticut to -2.5% in the District of Columbia.
The BEA also released revised estimates of real state personal income for 2008 to 2016 that incorporate the results of the comprehensive update to state personal income. Those revisions include a fresh update of state personal income with more detailed and complete source data and seasonal factors, and the results of the BEA’s completed national income and products accounts.
In Arkansas, the revised data show slightly lower incomes in early 2016, said Pakko, but higher growth estimates for the state since then.