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Tuesday, November 22, 2016

Personal Income Data Suggest Weaker Economy

The Bureau of Economic Analysis has released new data on personal income. This data can give us a great deal of information on how our economy is doing, especially when put in the context of other data, such as private consumption and entitlements paid out to Wyoming residents.

First, the update on personal income itself. In 2015, Wyoming residents earned $32.9 billion in personal income, up 3.1 percent from 2014. We paid $3.7 billion in personal taxes, leaving us with a disposable income of $29.2 billion, a 3.4-percent increase in money available in household checkbooks from 2014. 

Adjusted for population, the numbers look as follows:
  • Per-capita personal income: $56,081, up 2.7 percent over 2014;
  • Per-capita disposable income: $49,755, up 3.1 percent over 2014.

Compared to recent trends, these numbers are a bit weak. Since 2011, per-capita personal income has increased by 4.6 percent per year, while per-capita disposable income has increased 4.2 percent per year. This points to a tapering-off of personal-income growth, which in turn is very likely related to the decline in general economic activity in Wyoming that started in late 2015 and continues to this day. 

In fact, the growth in personal income has been tapering off for some time. As figure 1 shows, so has consumer spending:

Figure 1
Source: Bureau of Economic Analysis

Total private consumption increased by a meager 2.3 percent in 2015. This precipitates the decline in retail employment that is visible in the latest employment data from Bureau of Labor Statistics; conversely, the decline in retail employment that began in early summer of 2016 tells us that the weakening in private consumption and personal income visible in Figure 1 above will continue downward throughout 2016.

While the Bureau of Economic Analysis (BEA) does not release state-level private consumption data by quarter, but they just put out numbers for the second quarter of 2016. On an annual basis, personal income is down by some $500 million over the same quarter in 2015. This suggests that the weaker growth seen in Figure 1 is aggravated in 2016, which in turn - again - would explain why Wyoming is right in the middle of a protracted, statewide decline in private-sector employment

There is also a hint of the weakening in the Wyoming economy in another set of data from the BEA. They report total transfers received by individuals, by state, per year. Figure 2 reports this percentage for Wyoming  (orange) and for the United States as a whole (blue).

Figure 2
Source: Bureau of Economic Analysis

Over the past ten years, Wyomingites have consumed relatively less government handouts than is average for the country as a whole. This is good, of course, as it means a higher degree of self reliance among Wyoming residents. What is not good, though, is that while the ratio starts declining for the nation as a whole in 2011 and continues to do so through 2015, it drops in Wyoming from 2010 to 2012 but then remains flat with a small tendency to increase.

It remains to be seen exactly what type of entitlement is increasing, but preliminarily it looks like Supplementary Security Income, SSI, might be partly responsible. More on that later, though; for now, let us conclude that the data on and around personal income give the same indications for the near future that I have pointed to in several other blogs recently.

With that, I wish all my readers a Happy Thanksgiving. Make Gravy Great Again!

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