Division of Research

Commentary
from Jun '08 Indicators

The latest numbers released by the Bureau of Economic Analysis (BEA) for U.S. personal income (the income received by all persons from all sources) show an increase of 1.1 percent for the first quarter of 2008 over the previous quarter. This signals the 14th consecutive year of positive quarterly growth rates in U.S. personal income. The recent economic slowdown seems to have affected income growth, but not as much as anticipated. Figure 1 displays the percent change in U.S. personal income, calculated as the change from the previous year to avoid the influence of seasonal fluctuations. Also added is the data series for the Southeast and for South Carolina. For all series, there is a visible deceleration of personal income in the first quarter of 2008, although not large enough to set it apart from other cyclical movements that have occurred throughout the 1990s. More importantly, all series exhibit a similar pattern. Moreover, South Carolina’s personal income has been growing in tandem with the national economy. However, this is not necessarily good news. South Carolina per capita personal income, the best measure of the wealth and well-being of the population, has been historically lower than the national average. To catch up with the rest of the nation it needs to grow at a faster rate.

Figure 2 depicts the ratio of South Carolina per capita income relative to the national average and relative to the average of the Southeastern states. Here, the picture is not at all optimistic. In 1970, South Carolina’s per capita income was 75 percent of the national average, and, in 1996, it had reached a high of 83 percent. Since then, the state has been unable to make any further progress and actually seems to be losing ground. If other Southeastern states are a reference, a more worrisome picture emerges. Since 1970, South Carolina has been unable to make any visible progress. In the last year, the state moved below the 90 percent mark, which has not happened since 1983. Clearly, more than ever, the Palmetto State needs to find ways to become more competitive to close the income gap it has relative to other U.S. states. o

                     Paulo Guimarães, 7/30/08