Oregon Office of Economic Analysis

Highlights:

• Total personal income grew 1.86 percent from 2010 Q4 to 2011 Q1, the fastest growth since prior to the recession (2007Q3). Oregon ranked 23rd best among all states.
• Nearly 57% of the quarterly increase is attributable to gains in Wages and Salaries and Dividends, Interest and Rent.
• Real personal income less transfer payments remains 3.12 percent below pre-recession levels.

On Wednesday, the U.S. Bureau of Economic Analysis (BEA) released quarterly personal income data at the state level for 2011 Q1, along with revisions to the quarterly 2010 estimates. As seen in the graph below, the revisions in total were minor (the difference between the dark blue and light blue lines). Overall, personal income continues to expand.

The red portion in the graph above is our office’s most recent forecasted value, and actual personal income came in slightly below forecast. The forecast error is 0.6 percent, with the error concentrated in the Contributions for government social insurance component (more on the components later). Our office forecasted the second fastest personal income growth since before the dot-com bubble burst and the early 2000s recession, based on strong employment gains, along with large dividend payments by corporations. However the personal income gains were not quite to the forecasted level and came in fourth fastest, as seen in the following graph. (Note that this graph looks awfully similar to the employment graph shown in our office’s April tracking report. That is, current growth rates look rather pedestrian compared to the 1990s growth, however they look great compared to the 2000s.)

Personal income increased 1.86 percent quarter-over-quarter and 4.37 percent year-over-year. Income is up in nearly all categories, except for unemployment benefits (which is good, provided these individuals are able to find employment, otherwise this is not necessarily a good change) and farm proprietors’ income. Oregon’s quarter-over-quarter relative ranking among all states is 23rd, however the year-over-year ranking is worse as the state ranks 41st best. In terms of strictly wages and salaries, Oregon’s growth is stronger than the average state, which is expected given our stronger than average employment reports during the expansion (particularly in early 2011). Oregon’s 1.29 percent quarter-over-quarter wage growth ranks 7th best among all states and Oregon’s 3.95 percent year-over-year wage growth ranks 22nd best. Given that Oregon’s wage growth ranking is substantially higher than total income, it follows that Oregon’s non-wage income growth remains below that of the average state. For more information on the definition of each component, please see the BEA’s glossary.

The graph below shows the level of income by major component for Oregonians from 1999 to 2011 Q1. Wages and Salaries, the largest component of Personal Income, have regained nearly two-thirds of their losses from the recession. This category declined 6.64 percent during the recession and even with the gains over the past year, remains 2.41 percent below pre-recession levels.

While increasing personal income is certainly good news, Oregon, along with the nation remains below pre-recessionary levels on an inflation-adjusted basis. The graphs above discuss personal income in nominal terms. Also, during recessions Transfer Payments and other automatic stabilizers kick in and substitute for some of the income loss due to job loss. As this happens, total income does not fall by as large of an amount as, say, wages do, as the transfer payments are able to prop up income to some degree. One way to gauge the true underlying state of income is to look at Total Personal Income minus Transfer Payments, on an inflation adjusted basis. As the graph below illustrates, Oregon’s real income less transfer payments remains 3.12 percent below pre-recession levels (the U.S. is 3.50 percent below). During the worst of the recession, Oregon fell a total of 6.72 percent (the U.S. fell 6.14 percent), so the current levels are a sizable improvement, however there remains approximately half of the ground lost to make up to reach the levels from just before the recession.

The BEA is scheduled to release 2011Q2 data on September 22, 2011, along with any revisions to prior estimates.