Oregon Office of Economic Analysis

Highlights:

• Major data revisions altered Oregon’s personal income history
• Total personal income grew 0.97 percent in the quarter and 5.38 percent over the year.
• Real personal income less transfer payments remains 6.0 percent below pre-recession levels.

Two weeks ago, the U.S. Bureau of Economic Analysis (BEA) released quarterly personal income data at the state level for 2011 Q2, along with major revisions to the quarterly figures over the 2008Q1 – 2011Q1 period. Earlier in the year when the BEA revised the National Income and Product Accounts (aka the major GDP revisions), they had yet to filter those revisions down to the state and local levels, however with the most recent release the national revisions are now reflected in the state data. As seen in the graph below, the revisions were quite dramatic, however the figures for the most recent quarter are roughly equivalent to what was estimated previously. The revisions affected the path of how we got to where we are.

Note: The red portion in the graph is our office’s forecast for personal income. While actual personal income came in lower than forecast (due to revisions), the actual growth rate for the quarter is slightly faster than our forecasted rate.

Income is up in nearly all categories, except for unemployment benefits over the year and farm income in the most recent quarter. Oregon’s quarter-over-quarter relative ranking among all states is 44th, however the year-over-year ranking is better as the state ranks 21st 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). For more information on the definition of each component, please see the BEA’s glossary.

While increasing personal income is certainly good news, Oregon, along with the nation remains below pre-recessionary levels on an inflation-adjusted basis. The information 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 6.0 percent below pre-recession levels (the U.S. is 5.0 percent below). During the worst of the recession, Oregon fell a total of 10.9 percent (the U.S. fell 9.9 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.

Note: The historical revisions revealed, as shown in the first graph, a much deeper recession than previously estimated. In Oregon the peak to trough decline is 10.9 percent, however the earlier estimates pegged the decline at 6.7 percent. For the US the earlier estimates saw declines of 6.1 percent compared to the 9.9 percent using today’s data.