Arizona personal income plummets as federal income support dissipates
Arizona personal income declined by 26.5% in the second quarter, faster than the national drop of 21.8% (Exhibit 1). Arizona’s growth ranked 34th in the nation and followed a 61.8% increase in the first quarter of the year.
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Exhibit 1: Personal Income by State, Percent Change, 2021Q1-2021Q2
The state personal income declined in the second quarter was driven by reduced transfer receipts, which fell by $35.5 billion. The drop reflected reduced federal income support from economic impact payments and unemployment insurance benefits related to the pandemic. Transfer receipts fell in every state.
In contrast, Arizona net earnings from work rose rapidly in the second quarter, up by 8.4%. Even so, that was below the national average gain of 10.7% (Exhibit 2). This reflected the strong job recovery during the spring.
Exhibit 2: Net Earnings from Work by State, Percent Change, 2021Q1-2021Q2
Exhibit 3 shows over-the-year growth rates for net earnings, transfer receipts, and dividends, interest, and rent. In the second quarter, net earnings were up 9.9%, transfer receipts were down 22.8%, and dividends, interest, and rental income was up 1.6%. Arizona personal income was down 1.5% over the year in the second quarter, while U.S. personal income was up 1.1%.
Exhibit 3: Arizona Over-the-Year Growth in the Major Components of Personal Income, Percent
With this release, state quarterly personal income has been revised back to 1998. The latest estimates show that Arizona personal income rose by 10.3% in 2020, up from 5.8% in 2019. Disposable income increased by 11.3% in 2020, up from 5.7% in 2019. Per capita personal income rose by 8.4% in 2020, up from 3.9% in 2019. The Bureau of Economic Analysis relied on population estimates based on the 2010 Census.
George W. Hammond, Ph.D., is the director and research professor at the Economic and Business Research Center (EBRC).