State personal income growth slowed to 0.5 percent in the third quarter of 2012, from 0.7 percent in the second quarter, according to estimates released today by the U.S. Bureau of Economic Analysis. Growth slowed in 34 states, accelerated in 11, and was unchanged in 5. Growth across states ranged from 1.4 percent in North Dakota to -1.6 percent in South Dakota. Inflation, as measured by the national price index for personal consumption expenditures, accelerated to 0.4 percent in the third quarter from 0.2 percent in the second quarter.
Earnings increased in 19 industries
Overall, earnings grew 0.5 percent in the third quarter of 2012, up from 0.4 percent in the second quarter. Earnings increased in 19 of the 24 industries for which BEA prepares quarterly estimates, with the largest percentage increase in farming (which grew 5.8 percent, after falling 4.7 percent in the previous quarter). The largest contributions to earnings growth were professional services (which increased $7.7 billion, up from $2.5 billion) and construction (which increased $6.7 billion, up from $0.3 billion).
The strong farm earnings growth reflects net insurance settlements associated with the summer drought. Farm proprietors’ income excluding those net insurance settlements fell 4.9 percent in the third quarter after falling 9.4 percent in the second quarter. The adverse effect of the summer drought on farm earnings was concentrated in a few states, mostly in the Plains region, and was largely responsible for the third-quarter decline in South Dakota’s personal income, where farming is a relatively large part of the economy. The surge in Texas’ farm income in the third quarter reflects an earlier harvest which concentrated the effect of the drought in the second quarter in that state.
Earnings in the construction industry grew 3.6 percent in Texas and 3.3 percent in Oklahoma in the third quarter. Earnings growth of $2.3 billion in these two states was more than one half the $4.4 billion of construction earnings growth in the other forty-eight states.
Earnings fell in 4 industries
Third-quarter earnings declined in 4 industries with the largest percentage decline, 2.0 percent, and largest dollar decline, $13.7 billion, in finance (finance earnings fell 3.8 percent or $27.4 billion in the second quarter). Earnings in the mining, information, and administrative services industries also fell in the third quarter.
The 2.7 percent decline in finance earnings in New York brought earnings in that industry to its lowest level since the first quarter of 2010 and offset earnings growth in all other industries in that state in the third quarter of 2012.
Mining earnings (including oil and gas earnings) fell in most states, including major energy producers such as Texas, Oklahoma, Louisiana, Wyoming, Alaska, and West Virginia. North Dakota, however, continued to expand and mining earnings grew 1.6 percent in that state in the third quarter.
Earnings in the information industry in the state of Washington grew 5.6 percent in the third quarter, up from 4.0 percent in the second even as earnings in that industry fell 0.6 percent on average in the other states. The growth in Washington reflects the vesting of stock grants, a common form of compensation among technology firms.
Earnings in the administrative services industry (including temporary help services) grew in Texas, Arizona, and New York and fell everywhere else. The declines in Oklahoma (down 23.7 percent), Nevada (down 2.5 percent), and West Virginia (down 2.3 percent) brought administrative services earnings in those states to their lowest levels since the first quarter of 2011.
Earnings were unchanged in 1 industry
Nationally, third-quarter earnings were essentially the same as second-quarter earnings (and first-quarter earnings) in the transportation industry. The stability at the national level results from offsetting declines in a few large states and increases in the other states. Transportation earnings declined in Texas (down 3.2 percent), New York (down 2.6 percent), Florida (down 0.2 percent), and five other states. In contrast, transportation earnings growth was robust in the states of Washington, North Dakota, Idaho, Wisconsin, Hawaii, and South Dakota, growing 1.6 percent or more in the third quarter.
