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Archive for the ‘Private Sector’ Category

Per Capita versus Per Household Personal Income II

Monday, November 8th, 2010

This is the follow-up blog to my previous post on Per Capita versus Per Household Personal Income to illustrate how per household income is a better metric than per capita income when comparing states.  As shown in the first chart, there has been a significant decline in average household size of 35 percent to 2.7 people from 4.13 people in the United States.

Maine and New Hampshire have mirrored the overall trend, but to varying degrees.  Maine’s household size was generally larger than the national average and New Hampshire from 1929 to the 1970s.  By the late 1970s/early 1980s, Maine’s household size had fallen below the national average and below New Hampshire.  After the 1980s, New Hampshire’s household size stabilized just below the national average while Maine’s continued to slide lower.

Average Household Size in New Hamsphire and Maine versus the National Average

The next two charts then compares the growth in real, per capita income with that of real, per household income for both Maine and New Hampshire.  With the two charts next to each other, it is easy to see that a larger gap begins to develop in per household income, relative to per capita income, between Maine in New Hampshire beginning in the 1980s–the same time that New Hampshire’s household size overtook Maine’s.

Overall, Maine’s relative economic performance relative to New Hampshire has been boosted, in the short-term, by a falling household size.  However, when adjusting for this effect Maine’s economic performance worsens substantially.  On per capita terms, New Hampshire’s income is 17 percent higher than Maine’s in 2009; while on per household terms it is 26 percent higher.

I will post another blog in the next few days showing how this relationship changes among all 50 states.

Private Sector Share of Personal Income in New Hampshire versus Maine in Per Capita Terms

Private Sector Share of Personal Income in New Hampshire versus Maine in Per Household Terms

Note: The historical data from the Census Bureau on households was only available every ten years during the decennial census.  Intervening years were interpolated.  Since 2000, household size has been reported on a more frequent basis under the new American Community Survey (ACS).  However, for technical reasons, this analysis only uses the 2009 ACS data with the intervening years being interpolated.  This will be replaced by data from the 2010 decennial census when it becomes available.

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Per Capita versus Per Household Personal Income

Thursday, October 14th, 2010
For state-to-state comparisons, per capita personal income is the standard-bearer.  Its simple to calculate and simple to understand; however, it’s also simply misleading.

Why?  States where the average household is larger are penalized under a per capita ranking  because children don’t earn anything.  I discovered this problem when I noticed what an outlier Utah was in the per capita personal income rankings where Utah ranks as the 49th highest in 2009 at $31,612.  However, Utah also has the largest average household size at 3.23 people.  And there is a large variance among states with the lowest household size belonging to North Dakota at 2.32 people.

As such, failing to hold constant the difference in the size of households rewards states with small households and penalizes states with large household using a per capita personal income metric.  To illustrate, let’s look at Maine versus New Hampshire.

In 2009 per capita terms, Maine ranks as the 30th highest at $36,479 while New Hampshire ranks as the 10th highest at $42,585.  New Hampshire’s per capita personal income is 16.7 percent higher or $6,107 dollars for every man, woman and child.

However, the average household in New Hampshire is larger than it is in Maine.  New Hampshire’s households average 2.62 people (the 24th highest in the country) while Maine’s households average 2.42 people (the 49th highest in the country).

After adjusting personal income by household, New Hampshire ranks as the 14th highest per household personal income at $111,402 while Maine ranks as the 41st highest per household personal income at $88,261.  New Hampshire’s per household personal income is 26 percent higher, or $23,141, than Maine’s . . . adjusting for household size makes a big difference.  Also note that Maine’s relative economic performance falls from 30th under per capita to 41st under per household . . . another big difference.

My take away from this is that per capita personal income is a seriously flawed metric.  A state can, in the short-term, enjoy a bonus to its per capita income by simply having fewer children which shrinks the average household size.  However, as Maine is now discovering there is a long-term price to be paid called Demographic Winter.  Last year the U.S. Census Bureau reported that Maine’s population in 2009 fell for the first time since at least the 1960′s.  Think economic development in Maine is already tough . . . try doing it with a shrinking population base!

Another blog will be posted soon to further illustrates why per household personal income is the better metric.

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New Hampshire’s Private Sector . . . 2nd Quarter 2010

Monday, September 20th, 2010

Today the U.S. Department of Commerce’s Bureau of Economic Analysis released new personal income data for the second quarter of 2010 and revisions for the past couple of years.  This new data brings a mixed-bag of new about New Hampshire’s private sector.  As shown in Chart 1, New Hampshire’s private sector share of personal income for the second quarter of 2010 was at a new all-time low of 75.18 percent–just edging out the previous low of 75.29 percent set in the last first quarter of 2010.

New Hampshire Private Sector as a Percent of Personal Income 2nd Quarter 2010

The good news is that the private sector change between the first and second quarters was a minuscule 0.1 percentage points which suggests that perhaps the dramatic drop in the private sector has at least found bottom.  Additionally, New Hampshire’s private sector gained ground against the national average.  In the first quarter of 2010, New Hampshire’s private sector was 9.71 percent larger than the national average but has climbed to 9.76 percent above the national average in the second quarter.

The major culprit behind this crowding-out of the private sector–the American Recovery and Reinvestment Act (ARRA).  In the second quarter of 2010, the ARRA pumped $138 million into New Hampshire’s economy via personal current transfer receipts.  This is down from the peak spending ($345 million) under ARRA in the second quarter of 2009.  As ARRA spending continues to wind-down, New Hampshire’s private sector should rebound from its all-time lows.

However, it remains an open question as to how much of the private sector will be permanently lost.  For example, some of the temporary spending under ARRA will simply be transferred to state and local governments for funding resulting in higher state and local taxes.

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In the News, August 27, 2010

Thursday, August 26th, 2010

Amity Shlaes cites our research in her latest column in Bloomberg.

The Union Leader republishes Amity’s article which is also the focus of their lead editorial.

The Concord Monitor also republishes Amity’s article.

The Providence Journal also republishes Amity’s article.

The Portland Press Herald also republishes Amity’s article.

Here is a chart which visually summarizes Amity’s article.

Maine versus New Hampshire Private Sector and Per Capita Personal Income

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