The combined sum of all income received by all Americans was $12.2 trillion in 2010. It was the end of what many economists consider the worst decade for the American economy since the 1930s. During the Great Recession GDP growth slowed to a crawl, and unemployment climbed to levels not seen in decades. Starting in 2010 the nation began its long process of recovery. In 2015, personal income amounted to $14.0 trillion, a 14.6% increase from five years earlier.
While all states have enjoyed some economic recovery, growth was far from even. North Dakota led the nation with a 27.9% increase in personal income, while Maine’s 4.2% personal income growth was the slowest. To identify the states where income is booming, and the states where it is not, 24/7 Wall St. reviewed personal income data from the Bureau of Economic Analysis for each state over the five years through 2015.
Personal income is the sum of the net earnings of all people from all sources before taxes, the largest component of which is wages and salaries. Most of the states where personal incomes grew the fastest have strong, flourishing industries that helped weather the recession and continue to aid the recovery. In an interview with 24/7 Wall St., Chad Shearer, senior research analyst at the Brookings Institution’s Metropolitan Policy Program, said, “The biggest factor in explaining why some places have recovered faster than others is really their industrial composition.”
The U.S. mining sector grew by 36.8% from 2010 through 2014, the most of any industry. While mining accounts for only 2.6% of the national economy, incomes in states with large mining sectors grew the fastest. In North Dakota, where mining accounts for the largest share of state GDP, personal income grew by 27.9% — the fastest in the country.
On the other hand, the government sector experienced the second slowest growth after the utilities sector. In 2013, an automatic federal budget sequestration took place, initiating a chain of state budget cuts as well. “States were not getting the aid that they normally would have, and also saw their tax revenues diminish very quickly. So during the recession, we saw huge, huge spending cuts,” Shearer said. In New Mexico, home to multiple military bases and federal laboratories, government operations accounted for 23.7% of GDP in 2014, the largest share of any state’s government sector. Overreliance on a sector vulnerable to spending cuts partially explains why new Mexico had the sixth slowest five-year personal income growth.
Economic growth is closely related to income growth, and the two almost always move in tandem. In many cases, however, an expanding population can offset sluggish GDP growth. In many Sun Belt states such as Florida, South Carolina, and North Carolina, GDP growth from key industries such as manufacturing and real estate underperformed and were outpaced by most other states. However, these are the states with the largest inbound migration. The additional salaries from new workers and pension incomes from retirees boosted these states’ personal incomes. In states such as Colorado and Texas, both rapid population and GDP growth helped yield some of the fastest growing personal incomes in the country.
Personal income, or the sum of net earnings by all people from all sources, was reviewed in each state and in each year from 2010 to 2015 from the BEA. Income growth rates were calculated from real personal income in 2010 to real personal income in 2015, all in 2009 dollars. The BEA has not yet published real personal income figures for 2014 or 2015. We derived our own estimates of real personal income by adjusting nominal figures from regional and national prices, based on the BEA’s methodology. Due to limited data availability, real personal income estimates for 2014 and 2015 were calculated with 2013 regional prices. Also from the BEA, we considered industry contributions to GDP for 2010 and 2014. Labor force and unemployment came from the Bureau of Labor Statistics. Socioeconomic factors, such as educational attainment rates, poverty rates, and net population change from migration, came from the U.S. Census Bureau’s 2015 American Community Survey (ACS).
These are the states where incomes are increasing the most (and least).
Sponsored: Find a Qualified Financial Advisor:
Finding a qualified financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to 3 fiduciary financial advisors in your area in 5 minutes. Each advisor has been vetted by SmartAsset and is held to a fiduciary standard to act in your best interests. If you’re ready to be matched with local advisors that can help you achieve your financial goals, get started now.