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Regional perspectives; state personal income: methodological improvements.

REGIONAL PERSPECTIVES

State Personal Income:

Methodological

Improvements

THE estimates of State personal income shown on pages 55-59 incorporate two methodological improvements. First, the quarterly estimates incorporate new seasonal factors for the services industry. Second, the preliminary annual estimate of the U.S. wage and salary total for 1989 incorporates ES-202 data for the first three quarters of 1989. In addition, the preliminary annual estimate of farm proprietors' income incorporates, as is usual in April, annual information on farm income and inventories by State and annual information on U.S. farm expenditures totals from the U.S. Department of Agriculture. Table 1 shows the resulting revisions to the U.S. totals of personal income and selected components.

Seasonal factors for the services industry. - As was discussed in the October 1989 SURVEY OF CURRENT BUSINESS, lump-sum payments by personal service corporations to their owner-employees (doctors, lawyers, etc.) have been unusual since the fourth quarter of 1987, reflecting provisions of the Tax Reform Act of 1986 and the Revenue Act of 1987.(1) It was indicated that BEA's procedures to seasonally adjust the State ES-202 data did not deal well with these payments and would be reexamined. The estimates now incorporate new seasonal factors for the services industry for 1986-89.(2) The new seasonal factors were developed on the assumption that the tax law changes affected the seasonal pattern beginning in the first quarter of 1988. Further revisions to the seasonally adjusted quarterly ES-202-based estimates should be expected as more observations reflecting the new seasonal pattern become available.

Table 1 shows that the effect of the new seasonal factors was to add an average of $11.4 billion (annual rate) to the U.S. total of wages and salaries in the services industry in the first and second quarters of 1988 and to subtract that amount from the second half, mostly from the fourth quarter. The pattern of revision is similar for 1989. (The quarterly revisions for 1986 were minimal, and those for 1987 were small except in the fourth quarter.)

Preliminary annual U.S. wages and salaries total. - Previously the preliminary annual State wage and salary estimates were controlled to the wage and salary total in the national income and product accounts, which is based on 790 data at this point in the estimating cycle. To take better advantage of the available data, the U.S. totals for wages and salaries now used for the State estimates in all industries are based on three quarters of ES-202 data. (3)

Table 1 shows that the wages and salaries total in the third quarter of 1989 is revised down $43.6 billion (annual rate). A $30.6 billion downward revision in industries other than services reflects the incorporation of the ES-202-based total, and a $13.0 billion downward revision in services reflects both the incorporation of that total and the revision of the seasonal factors. [Tabular Data Ommited]

(1.) See "State Estimates of Wages and Salaries: A Methodological Update." This article describes the ES-202 data and the 790 data, which are mentioned in the present article, and the way in which these data are used in the estimates of wages and salaries in the State series and in the national income and product accounts.

(2.) For 1986 and 1987, the new seasonal factors were prepared from the quarterly ES-202 data for 1975-87 by excluding an estimate of the extra lump-sum payment in the fourth quarter of 1987 that was a result of the tax law change. For 1988 and the first three quarters of 1989, the new seasonal factors were prepared by adjusting the 1986 and 1987 observations to simulate what they would have been with the new pattern, thus providing the minimum number of quarters needed to run the seasonal adjustment program.

(3.) In July, as part of the regular annual revision of the national income and product accounts, the 1989 annual estimates of the wage and salary component will be revised to incorporate four quarters of ES-202 wage and salary data. In August, as part of the regular annual revision of State personal income, the 1989 annual estimates of the wage and salary component of the State series will be revised to incorporate the fourth-quarter 1989 ES-202 data.
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Publication:Survey of Current Business
Date:Apr 1, 1990
Words:706
Previous Article:Updated measures of revision for quarterly GNP estimates.
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