Wednesday, June 27, 2012

Personal income up in Colorado, but lags price increases

Total personal income in Colorado was up  3.6 percent from the first quarter of 2011 to the same period this year. According to new data released today by the Bureau of Labor Statistics, personal income growth in the state has been positive for the past nine quarters, although the growth rate has been decreasing for the past five quarters.

Total personal income in Colorado is now up 5.4 percent from the 2008 peak reached before the financial crisis of 2008. However, the consumer price index has increased by about 6.5 percent over the same period, so total personal income has actually declined over this period in real terms.

The first graph shows personal income and personal income growth rates in Colorado over the past decade. Personal income declined during 2009 and early 2010, but has grown over the past two years. Personal income as shown here is not adjusted for inflation.

Nationwide, personal income growth has been less strong than has been the case in Colorado: Total personal income has increased by 5.0 percent from 2008 peak levels nationwide, and it was up 2.8 percent from the first quarter of 2011 to the first quarter of 2012.

It is worth noting, however, that total personal income can be increased through population growth, while on a per capita basis, personal income may be weaker in Colorado than nationwide. See here for more.

The effect of personal current transfer receipts

An important component of personal income is "personal current transfer receipts." These are forms of income not tied to wages and employment income and include payments such as social security payments, unemployment insurance, Medicare and Medicaid.

When personal current transfer receipts are removed from personal income, income growth is not as robust.

The second chart shows personal income minus personal current transfer receipts.

Without the inclusion of transfer receipts, personal income in Colorado is up 2.5 percent from peak levels. Personal income is up by 5.4 percent from peak levels when personal current transfer receipts are included. Neither growth rate exceeds the price inflation rate.Since 2008, however, personal current transfer receipts, when taken separately from overall personal income, have increased by 29 percent while income from wages have increased by 3.1 percent.

 Nationwide, as of the first quarter of this year, personal income minus transfer receipts was up 2.1 percent, compared to a 5 percent growth rate for all income overall. Over the same period nationwide, transfer receipts were up 21 percent while income from wages were up 3.9 percent.

Rates of increase have been slowing over the past year.


Total personal income is up in Colorado, likely driven by continued population increases and by increases in personal current transfer receipts. Overall personal income growth has not kept up with the consumer price index since 2008's peak levels, however.

Note: Personal income is the income received by all persons from all sources. Personal income is the sum of net earnings by place of residence, property income, and personal current transfer receipts. Total personal income will rise as population rises, even if household incomes are declining. Property income is rental income of persons, personal dividend income, and personal interest income. Net earnings is earnings by place of work (the sum of wage and salary disbursements, supplements to wages and salaries, and proprietors' income) less contributions for government social insurance, plus an adjustment to convert earnings by place of work to a place-of-residence basis. Personal income is measured before the deduction of personal income taxes and other personal taxes and is reported in current dollars (no adjustment is made for inflation).