Morton Marcus: On personal income, Indiana does comparatively well
Monday, July 02, 2012 5:39 AM
INDIANAPOLIS - Last week the BEA (Bureau of Economic Analysis) in the U.S. Dept. of Commerce released the latest state quarterly personal income data for the first quarter of this year. The timing could not have been better.
Recently we have received much good news about the Indiana economy. So much good news that skeptical Sam Schmaltz has been questioning each piece of good news and sniffing about to discover a “good news” conspiracy.
This column is dedicated to Sam: My friend, your usual skepticism can be relaxed. Indiana’s personal income (PI), a good measure of how the state is doing, rose faster than did that of the nation in the first quarter of this year. Plus, we have been out-performing the nation over the last year.
Specifically, Indiana advanced at an annual rate of 4 percent in the first quarter compared to the U.S. increase of 3.4 percent. Over the past year, our growth has been at a rate of 3.1 percent versus the nation’s 2.9 percent.
Naturally, Sam, you want to know where we had our best growth. We don’t have data on a geographic basis, but we can see how we are doing by industry.
First, we outpaced the nation in farm earnings. Yes, I know that farm earnings are very erratic, still the seasonally adjusted figures show Indiana up 38 percent and the nation down 13 percent over the past quarter. True, farm earnings account for only 1.1 percent of Hoosiers’ total PI so the impact is not too great of this major differential between the state and the nation.
Second, our construction sector did better than the United States generally. Right, folks in the construction industry are continuing to complain how bad things are, but in Indiana earnings from construction were up 10.2 percent compared to 8.8 percent nationally in the first quarter. Year-over-year, that is first quarter 2011 to first quarter 2012, Indiana advanced at a 14 percent rate against the background of a national 6 percent growth rate.
Third, our dominant manufacturing industry, still 20 percent of all earning by Hoosier workers, outpaced the nation 6 percent to 4 percent in the most recent quarter for which we have data.
Fourth, there were several dull spots where we came in behind the U.S. figures, including retail trade, finance, and federal government services. Nonetheless, by-and-large, our state outperformed the nation in personal income growth.
Put all that together, Sam, and Indiana ranked 9th in the nation for PI growth rate during the first quarter of this year. That’s the bottom of the top quintile, if you want to find some way of giving a negative characterization to the results. In addition, we came in 24th in the rate of growth for the past four quarters. It’s mediocre to be at the bottom of the top half, but it’s far better than Connecticut and Mississippi which were at the bottom of the bottom half for the past year.
The only place where your skepticism will work, Sam, is in the fact that the national annualized growth rate for the first quarter was 3.4 percent, unadjusted for inflation. When you factor-in a 2.4 percent increase in consumer prices over that quarter, you are left with only 1 percent real growth.
Most Americans do not find that satisfactory and blame our slow growth on the President and the Doolittle Congress. The decisions about our present and our future, however, are made in our homes and offices where skepticism now reigns.
Mr. Marcus is an independent economist, writer and speaker formerly with the IU Kelley School of Business.