Sustainable Personal Income falling for longer and faster for Minnesota than for the United States
Data released by the Bureau of Economic Analysis last week showed that, in the second quarter of 2022, Personal Income in Minnesota increased by 5.4% at an annualized rate. This rate was lower than that of the United States generally — 5.8% — and 28 other states.
…deals with Personal Income and its components in the aggregate, not on a per capita basis. And, of course, it takes no account for inflation.
When we adjust for this, we see that only in North Dakota did per capita Personal Income rise, in real terms, in the second quarter of 2022. In Minnesota, per capita Personal Income fell, in real terms, by 1.2% in the second quarter of 2022, worse than in 22 other states and the District of Columbia.
Personal Income is derived from three sources, which we can roughly categorize as wages, capital, and transfers. The first two are sustainable in the sense that they arise from productive activity; working or investing. Transfer income is a product of this: income has to be produced by someone before it can be transferred to someone else. If we strip transfer income out, then, we can see what has been happening to Minnesotan’s sustainable incomes.
Using the fourth quarter of 2019 as our base — the last before COVID-19 hit — we see, in Figure 2, that, while sustainable per capita Personal Income began falling in real terms in the United States in the fourth quarter of 2021, in Minnesota it started falling in the second quarter of 2021. Indeed, while sustainable per capita Personal Income for the United States is now 0.4% lower, in real terms, than it was in the fourth quarter of 2019, in Minnesota it is now 1.8% lower. Inflation is ravaging living standards across the United States, but Minnesotans are being hit especially hard.
Figure 2: Real growth in per capita Personal Income from labor and capital, 2019:Q4=100
The economy is the number one issue for Minnesotans. These numbers illustrate why.