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Regional nonfarm personal income in the current economic expansion.

Regional Nonfarm Personal Income in the Current Economic Expansion

REGIONAL patterns in nonfarm personal income growth in the current expansion have differed from regional patterns in previous post-World War II expansions. In the current expansion, nonfarm personal income in the New England and Mideast regions has increased more rapidly than the national average; in the Great Lakes, Plains, Southwest, and Rocky Mountain regions, it has increased less rapidly than the national average. In contrast, in most previous expansions, nonfarm personal income in the Great Lakes, Plains, Southwest, and Rocky Mountain regions increased at rates near or above the national average; in the New England and Mideast regions, it increased at rates below the national average. For these comparisons, the current expansion is measured from the third quarter of 1982--the trough quarter for real GNP in the 1981-82 recession--to the second quarter of 1987--the most recent quarter for which estimates of regional personal income are available.

Industry growth patterns in nonfarm payrolls thus far in the 1981-87 national business cycle differed from those in preceding business cycles, and these differences help explain the contrasting patterns in regional nonfarm personal income growth.

Payrolls in durables manufacturing were weak in the 1981-82 recession, as is typical in recessions. Uncharacteristically, these payrolls did not recover strongly in the current expansion and so adversely affected growth in the Great Lakes and Plains regions, where these payrolls account for a large share of nonfarm personal income.

Payrolls in private service-type industries, in contrast, were unusually strong in the current expansion. They stimulated nonfarm personal income growth in the New England and Mideast regions, which long have been centers for these industries.

Payrolls in the mining and related construction industries were unusually resistant to the 1981-82 recession due to rising oil prices but were unusually weak in the current expansion due to declining oil prices. Relative changes in these payrolls were reflected in the relative weakness in nonfarm personal income in the "oil-patch' Rocky Mountain and Southwest regions.

In the Far West and Southwest regions, nonfarm personal income increased more rapidly than the national average in both the current and previous expansions.

Fast-growing regions

In the current expansion, the fast-growing regions, as measured by the percentage increase in nonfarm personal income, were: New England, 46.5 percent; Far West, 43.9 percent; Southeast, 42.2 percent; and Mideast, 39.6 percent. Nonfarm personal income for the Nation increased 38.0 percent. In the New England region, payrolls in industries that provide data processing, computer, and research and development services to the region's high-technology industries constributed to fast growth. In the Mideast region, payrolls in industries that provide banking, brokerage, advertising, consulting, and management services to national and international markets contributed to fast growth. In both regions, large increases in construction payrolls, in part reflecting continuing development of urban commercial centers, also stimulated growth. The Far West and Southeast regions, like the New England and Mideast regions, benefited from strength in private service-type payrolls. The Far West and Southeast regions, in addition, benefited from large increases in durables manufacturing payrolls as a result of the national defense buildup early in the expansion.

Slow-growing regions

The regions that had the smallest percentage increases in nonfarm personal income were: Rocky Mountain, 27.6 percent; Southwest, 28.9 percent; Plains, 30.8 percent; and Great Lakes, 33.2 percent. In the Rocky Mountain and Southwest regions, large declines in mining payrolls contributed to slow growth, as a decline in oil prices during most of the expansion discouraged oil exploration and production. In the Southwest region, in addition, weakness in oil mining dampened the growth of payrolls in durables manufacturing industries that produce oil field equipment and oil refining and pipeline equipment. Construction payrolls declined in part due to an oversupply of commercial and industrial structures, many of which had been built before the decline in oil prices. In the Plains region, weakness in payrolls in construction, trade, and finance contributed to slow growth. In the Great Lakes region, weakness in payrolls in durables manufacturing industries--including primary metals, fabricated metals, and machinery-- was a major growth-retarding factor.
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Author:Friedenberg, Howard L.
Publication:Survey of Current Business
Date:Oct 1, 1987
Words:685
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