State Personal Income in 2011 is up 5.1%

The economic recovery is in full swing in most states. The Bureau of Economic Analysis released State Personal Income which shows an increase on average of 5.1% for 2011. This past year's increase was better than 2010 when personal income increased 3.7%. The highest increase was in North Dakota at 8.1% and the lowest increase was 3.4% in Maine. Personal income is income received by all persons from all sources.

Personal Income Percent Change from 2010 to 2011:

Earnings, which are only wage earnings, grew an average 4.4 percent in 2011. The increase in wage earnings was in the private sector as state and local government employees saw a decline in average earnings of 0.3%. Civilian federal government wages increased 0.6% in 2011, a lot slower than the 2010 increase of 7.2%

Earnings are now above pre-recession levels in 45 states. Earnings in some states that were hardest hit by the housing bubble are still below pre-recession levels. These states include Arizona, Florida, and Nevada. Two other states still below pre-recession levels are Michigan and Oklahoma.

Inflation is heading higher also, which bodes well for CD rates and savings rates but not mortgage rates. Inflation, which is measured by the national price index for personal consumption expenditures, increased to 2.5% in 2011. The price index increased 1.8% in 2010.

Higher inflation is the key to the Fed raising interest rates which will force deposit rates and current mortgage rates higher. Interest rates have been on a slow decline since 2008. CD rates on 1 year certificates of deposit are averaging 0.37% and savings account rates are averaging 0.17%.  The past several years have been hard on retirees who rely on interest income to live.

During the same time, mortgage rates have declined to record lows which has helped home buyers and homeowners in a position to refinance to a lower refinance rate. Mortgage rates today on 30 year home loans are just above 4.00% and have been in the 4.00% range for all of 2012.

Author: Brian McKay
March 28th, 2012