States' Personal Income Grew Faster in Q1

As the economic recovery continues, personal income is also beginning to improve. State personal income growth was 0.9% on average in the first quarter, according to the Bureau of Economic Analysis. This might not sound so impressive, but it's better than the 0.5% growth in the final quarter of 2009. Most importantly, private earnings are finally improving. In order for Americans to continue to fuel the recovery, spending must increase. That's why personal income growth is so important.

First, here's how private earnings have changed since 1990:

personal income history - 2010-q1.PNG

It might be hard to see, but last quarter was the first time private earnings have increased since the third quarter of 2008. A very positive sign, it also rose by 0.9% in the first quarter. Government hiring has made up for a lot of the labor market growth this year, but this shows that the private sector is also definitely improving.

Here's the scorecard for states:

personal income states 2010-q1.gif

One immediate observation is that the southern U.S. outperformed most of the other states in terms of personal income growth in the first quarter. Most of the blue is towards the bottom of the map. Conversely, most of the states in the lowest quintiles are in the northern U.S.

If you cross-reference this map with the state unemployment data for May also released today (see map below), you find something else that's interesting. Some of the states with the lowest rates of unemployment also had the worst income growth. These examples include the Dakotas, Montana, Minnesota, and Arkansas. Even though these states had relatively low unemployment rates, their personal incomes aren't growing much, if at all. Unfortunately, the new worst state in the U.S. for unemployment -- Nevada -- also appears to be struggling with personal income, as it's in the lowest quintile.

state unemployment map 2010-05.PNG

Note: Growth rates are annualized and seasonally adjusted.