Nebraska and Iowa were among the 10 fastest-growing states for personal income in 2013, the federal government said Tuesday. Nebraska is now ranked 17th among states for per capita personal income and Iowa 22nd.
University of Nebraska economist Eric Thompson cautioned that the states’ growth on this key measure of economic prosperity was not far above the U.S. average and was slower than last year.
“But any time you’re above the national average, that’s good progress in the economy and something to be pleased with,” he said.
Total personal income grew more slowly in every state in 2013 than in 2012, though the picture tended to be better in the Plains and Western regions.
Total personal income grew by 3.2 percent in Iowa, the ninth-fastest-growing state, and by 3 percent in Nebraska, the 10th-fastest. The U.S. average personal income grew 2.6 percent, down from 4.2 percent in 2012, according to the Bureau of Economic Analysis.
The slower growth reflected the expiration in 2013 of the “payroll tax holiday,” a temporary reduction in the Social Security tax, the bureau said. It also stemmed from a 2012 acceleration in the receipt of income in anticipation of changes in individual income tax rates for 2013.
Nationwide, earnings grew in every industry but civilian federal government. Growth was greatest in professional services, construction and health care. However, growth slowed in most industries, with exceptions including construction and farming.
On a per-capita basis, Iowa’s and Nebraska’s personal income rankings have risen in comparison with other states’ since before the Great Recession. Nebraska’s per capita personal income was at $46,033 last year, compared with $38,443 in 2007, when it ranked five spots lower at 22nd. Iowans had per capita personal income of $45,114 last year, compared with $36,838 in 2007, when the state ranked 27th, also five spots lower.
Nebraska’s 2013 gains came largely in nonfarm sectors, including the state’s traditional areas of strength: manufacturing, transportation, finance and management, Thompson said. He said it was good news that gains from wages grew faster than gains from safety-net programs like Social Security and Temporary Assistance for Needy Families.
Thompson said he was cautious about the hourly wage data, though, since the growth wasn’t confirmed by similar data reported by the Bureau of Labor Statistics.
Personal income, which is calculated by place of residence, is defined as the income received by all people from all sources. It includes wages before the deduction of income taxes, minus contributions for government social insurance. It also includes rental income and income from dividends and interest.
Government agencies use the personal income data for allocating funds and determining matching grants, as well as in forecasting energy and water use, the bureau said. States use the data to project tax revenue and the need for public services. Economists and business groups use it for research.
In the fourth quarter of 2013, personal income growth slowed further, to 0.6 percent nationwide, and Iowa was hit hardest among all states. Personal income fell 0.6 percent there, reflecting lower farm earnings on falling crop prices, the bureau said. Thompson said falling crop prices also had a negative effect on Nebraska’s economy in the second half of the year.