Thursday, June 14, 2012

Per capita personal income growth in Colorado lags nation

The U.S. has experienced more growth than Colorado in per capita personal income in every year over the past decade, except 2005. Per capita personal income data, released by the Bureau of Economic Analysis for all states, shows that since the 2002 recession in Colorado, per capita personal income growth in this state has tended to lag national growth.

The first graph shows year-over-year change in both Colorado and the US.  In 2009, Colorado per capita income fell further than was the case in the US overall.

Also notable is that overall annual growth since 2002 have not matched the growth seen during the boom years of the late 1990s. (All growth rates are year-over-year.)

When measured in dollars, personal income in Colorado during 2011 was still slightly below peak levels reached during 2008. According to the report, the per capita personal income in Colorado during 2011 was $44,088 and it was $44,180 during 2008. The graph shows how per capita personal income declined after 2008 in Colorado. Nationwide, however, per capita person income has increased since 2008 from $40,947 during 2008 to $41,663 during 2011. From this, we can also note that in spite of lagging growth rate and a lack of return to peak levels, Colorado's per capital income level remains above the nation's.


Possible relationship to foreclosure growth 

We often receive questions about why Colorado began to experience large numbers of foreclosure before most other states in the nation. Indeed, during 2006 and 2007, as Colorado was ranking in the top three of all states for foreclosure activity, California, Arizona, and other states now known for large amounts of foreclosure activity were still experiencing relatively little foreclosure activity.

One possible factor may be the relatively small amount of per capita personal income growth in Colorado during this period. The third graph shows that among several states that were hard hit by foreclosures after 2008, Colorado ranked last for per capita personal income growth in most years. In 2002, Colorado was the only state to experience a decline in income, when compared to the states of AZ, CA, FL, and NV. During the years of 2002, 2003, 2004, and 2006, Colorado experienced the smallest amount of income growth among all these states.

The situation changed after 2007, but we can note that when Colorado seemed to be different from many states in its foreclosure activity, this was also a period when Colorado was experiencing less income growth than many states. Logically speaking, income growth can be connected to foreclosures if weak growth is a cause of mortgage delinquency and declining demand for home sales. In Colorado, the weaker income growth earlier in the decade of 2001-2010 may help explain why Colorado saw more foreclosure growth early on.

Note: Total personal income growth in Colorado, which is distinct from per capita income growth, has tended to be stronger in Colorado when compared to the U.S. overall. See here.  Per capita personal income is total personal income divided by the population.