Although Arkansas saw robust economic expansion and record low unemployment in the first half and third quarter of 2017, personal income growth across the state lagged behind the rest of the nation as the farm sector fell, according to new estimates from the U.S. Bureau of Economic Analysis.
For the three-month period ended Sept. 30, Arkansas’ personal income increased 0.5%, slightly below the national average of 0.7%. That compares with growth of 0.4% in the second quarter, which was revised downward two percentage points due to lower estimates for wage and salary growth.
U.S. economists, including members of the Federal Reserve’s Open Market Committee, watch personal income growth as a key indicator of nation’s economic health. Personal income consists of an individual’s total earnings from wages, investments and other ventures such as rent income. It is the sum of all the incomes received by all the individuals or household during a given period, such as a fiscal year or quarter.
On his Arkansas Economist blog, University of Arkansas at Little Rock economist Michael Pakko said the tepid third quarter personal income data, which ranked 38th among U.S. states, was largely the result of weak income growth in the farming and agriculture sector.
“A drop in the volatile farm Income component slowed growth both nationally and here in Arkansas, but accounted for a larger reduction in total growth for Arkansas because it accounts for a larger share of income,” said Pakko, director of UALR’s Arkansas Economic Development Institute.
According to the U.S. Department of Agriculture’s Economic Research group, U.S. farm income is projected to increase by $1.7 billion, or 3%, to $63.2 billion in 2017, compared to net farm income of $61.8 million in 2016. In 2014 and 2015, U.S. farm income was $92.6 and $80.7 billion, respectively.
Data from the BEA report, however, shows farm earnings decreased for the nation and in most states in the third quarter, and was the leading contributor to the decrease in total earnings in South Dakota and several other Midwest states. The USDA’s farm income forecast for 2017 culminates a five-year decline of 49% from the peak year net farm income of $123.8 billion in 2013.
Despite weak third quarter growth, personal income in Arkansas is up 3.3% over the past four quarters, compared to 2.6% nationally. In the fourth quarter of 2016, Arkansas personal income grew by 0.4%, but then jumped to strong 2% in the first quarter of 2017 to rank among the top states in the nation.
Overall, Arkansas’ nonfarm personal income growth rose 0.7% compared to a whopping 9.9% decline in farm income. Earnings by place of work rose 0.6%, led by strong wage and salary growth at 1%. Proprietors’ income was down 1.6% due to the farm component. Dividends, interest and rent income and personal current transfer receipts rose by 0.4% and 0.5%, respectively.
In other areas of the Arkansas’ economy, the state’s unemployment rate held nearly one full percentage below the national average in the third quarter. Arkansas jobless rate touched an all-time low of 3.4% in July, and then rose one percentage point to 3.5% in August and September.
Arkansas saw real Gross Domestic Product (GDP) expansion of 3.5%, ranking the state as the 14th fastest-growing state with $126.6 billion in current-dollar output. That followed impressive, but revised real GDP growth of 4.8% and 4% in the fourth quarter of 2016 and first quarter of 2017, respectively.
The fastest-growing sector by earnings was educational services, which saw personal income growth in health care and social assistance, construction and wholesale trade.
Nationally, personal income increased faster in Washington than in any other state at 1%. Texas had the next largest increase at 0.9%. South Dakota, New Mexico, Nebraska, Kansas and Iowa, all farming states, had the slowest increases in personal income at 0.3% or lower.
U.S. earnings grew 0.8% in the third quarter of 2017, up from 0.6% in the previous quarters. BEA data shows earnings increased in 22 of the 24 industries for which BEA prepares quarterly estimates, led by strong personal income contributions from the health care and social assistance, finance and insurance, and construction sectors.
The BEA, the economic research and analysis group housed within the U.S. Commerce Department, will release the third quarter GDP report for states on Jan. 24, 2018.