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Economy in Brief

State Personal Income in Q4 2020
by Charles Steindel  March 24, 2021

State personal incomes were wildly erratic in the 2020:Q4, with annual rates of growth ranging from South Dakota’s 16.7 percent to -16.1 percent in both Rhode Island and Pennsylvania. Two sharply divergent forces were at work: the ongoing pullback in transfer income, following the enormous spike in the second quarter, vs. reopenings and regained net earnings, which varied widely by industry and state. In general, income gains occurred in smaller states with less diversified economies—thus, Plains states generally saw increases in personal income. Income losses were larger in the Northeast, as exemplified by Pennsylvania and Rhode Island, while New York, New Jersey, and Massachusetts saw drops nearly as large. Nevada and Hawaii experienced rates of decline in excess of 15 percent, as travel and leisure activity remained depressed. A quite varied mix of states (Michigan, Illinois, Louisiana, and Georgia) were the others to see rates of decline greater than 10 percent.

The fourth quarter was in sharp contrast to 2020 as a whole. The surge in transfer payments resulted in increased income from 2019 for every state, with the range of growth extending from 2.4 percent (Wyoming) to 8.4 percent (Arizona and Montana). Net earnings, though, were much weaker: many states saw declines, led by New York’s 2.3 percent. A plunge in earnings in construction, retailing, and administrative and waste management services was particularly evident in New York. With offices closed, and little interest in refurbishing them, and few visitors to high-end merchants, the Empire State suffered. On the flip side, earnings in Utah grew an impressive 5.2 percent, with strength in many sectors.

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