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South Dakota Personal Income Update.


Total personal income increased nearly 2 percent in the fourth quarter of 1999 compared to the previous quarter. Annual estimates for 1999 show an increase of 5.8 percent compared to 1998. Strongest growth occurred in the finance/insurance/real estate industry at 9.5 percent followed by a 9.4 percent increase in services and an 8.8 percent increase in construction. The rapid growth in personal income was mainly attributable to an increase in net earnings.

The increase in South Dakota's personal income was driven in large part by the gain in wages and salaries. In 1999, personal income growth of 6.2 percent was exceeded by the 8.1 percent gain in wages and salaries. The state as a whole expanded at a higher rate than the seven state Plains Region according to recent estimates released by the U.S. Bureau of Economic Analysis. This article summarizes the latest personal income estimates available for the United States, selected states and counties along with a brief analysis of earnings by industry.

Total personal income is used as a broad indicator of a region's economic performance over a period of time. It represents primarily payments to individuals for productive services rendered and includes both the private sector and public (government) sector. Estimates of total personal income, per capita personal income and disposable personal income through 1999 for the United States, states and regions are regularly produced by the U.S. Department of Commerce, Bureau of Economic Analysis (BEA). County level income estimates through 1998 are also included in this article. Data in the accompanying tables reflect BEA's most recent comprehensive revisions. Therefore, data previously reported are revised in this article.

Personal Income and Its Components

Personal income is defined by the Bureau of Economic Analysis as income received by persons from all sources, including from government and business transfer payments, from participation in production, and from government interest. It is measured before the deduction of personal income taxes and other personal taxes and is reported in current dollars (no adjustment is made for price changes). Included in personal income are:

* Private and government wage and salary disbursements: monetary compensation for employees and corporate officers, tips, commissions, bonuses and any payments-in-kind that constitute income to the recipient.

* Other labor income: represents employer contributions to privately administered pension and welfare funds and other small items such as directors' fees and compensation of prison inmates.

* Farm and nonfarm proprietors' income: monetary income and income-in-kind of sole proprietorships and partnerships and tax-exempt cooperatives.

* Rental income of persons: monetary income of persons from the rental of real property (excluding the income of persons primarily engaged in the real estate business).

* Personal dividend income: measures the dividends received by persons from all sources.

* Personal interest income: interest income of persons from all sources.

* Transfer payments: payments to persons who do not render current services. Included are payments by government and business to individuals (i.e., Medicaid, food stamps, etc.) and to nonprofit institutions serving individuals.

* Less personal contributions for social insurance: consists of payments by employees, the selfemployed, and other individuals who participate in the following programs: federal old-age, survivors, disability & hospital insurance; supplementary medical insurance; state unemployment insurance and temporary disability insurance; railroad retirement; government employee retirement and veterans life insurance.

* Per capita personal income (PCPI) is estimated by dividing total personal income of residents by the resident population as of July 1 ofa particular year.

* Per capita disposable personal income (PCDPI) is estimated by dividing the disposable personal income of an area by its resident population. It allows direct comparisons of the disposable income available to residents of an area.

* Disposable personal income (DPI) personal income available to residents of an area after personal tax and nontax payments have been deducted from their total personal income. DPI represents the income available to persons for spending or saving.

Total and Per Capita Personal Income In 1999, total personal income (TPI) in South Dakota increased 6.2 percent compared to 1998. Major contributors to this growth include not only the growth in wages and salaries, but substantial gains in private sector earnings in the finance, insurance and real estate sector; agricultural services/forestry/fishing industry and also in services. Tables 1 and 3 include comparisons with the Plains Region States and the United States.

Per capita personal income (PCPI) which divides personal income among all the state residents, is often used as a measurement tool of the relative economic position of areas. It represents the estimated amount that each person would have to pay taxes, spend, and save. For the Nation, PCPI increased 4.8 percent from $27,203 in 1998 to $28,518 in 1999.

PCPI in South Dakota increased 5.9 percent, exceeding the U.S. increase of 4.8 percent. Tables 2 and 3 provide further comparisons for the area states.

Disposable Personal Income and Per Capita Disposable Personal Income

Disposable personal income (DPI) excludes nontax payments such as tuition, donations, and fees paid to government-operated schools and hospitals. Personal tax payments such as income, estate and gift, personal property and some license taxes are excluded as well as tax payments, i.e., personal contributions to social insurance, real estate taxes (these are considered a business expense and have been deducted from gross rent when TPI is calculated), and sales tax which are considered part of personal consumption expenditures.

The growth spurt in DPI in 1996(10.0%) was more than double the U.S. increase of 4.7 percent. In 1997, DPI growth slowed to 2.0 percent due mainly to declining farm earnings. Preliminary estimates for 1999 show a gain of 5.9 percent compared to the previous year. (See Tables 4 and 7.)

As shown in Table 5, South Dakota's disposable personal income (DPI) represented a larger percentage of total personal income (TPI) than it did for the U.S. and other states in the Plains Region. This can be attributed to South Dakota's lower tax structure. DPI in South Dakota was 89.4 percent of TPI, compared to 90.8 percent in 1995.

Among the Plains States, South Dakota, Iowa, and North Dakota had the lowest per capita disposable personal income (PCDPI) in 1999 as noted in Table 6. As shown in Table 7, South Dakota's annual average rate of growth in PCDPI for the period was 5.6 percent, nearly a full percentage point above the Plains Region and the U.S.

Major Sources of Personal Income in South Dakota

Table 8 includes annual estimates of personal income by source and earnings by industrial source from 1997-1999. Personal income is presented by place of residence (credited to the recipient's residence; while labor and proprietors' income (earnings) is presented by place of work (earnings are credited to the area in which the earning activity actually takes place).

For the 1998-99 period, industry growth was led by an 18.3 percent increase in the finance/insurance/real estate sector. A major factor in this increase were the low mortgage rates in 1999 that boosted home sales. Other sectors with strong gains included agricultural services/ forestry/fishing; services; and wholesale trade. Earnings in the mining sector have fallen sharply in the past several years. This sector has seen a significant drop in employment figures (from 2,300 in 1996 to a preliminary estimate of 1,200 in 1999). Farm earnings grew slowly, increasing 2.3 percent.

Transfer payments increased a modest 3.7 percent in 1999. A component of transfer paymentsustate unemployment insurance benefits--decreased sharply for this period due in part to a drop in disaster unemployment payments. Disaster payments were made in 1998 to farmers with flooded farmland.

On the public sector side, government's share of earnings has declined from 17.5 percent in 1997 to 16.4 percent in 1999. Even though the public sector's share has been declining in relative terms, it still comprises the second largest sectorwith total earnings of $2,096,000,000 in 1999. Services made up the largest segment of earnings. Manufacturing comprised 13.8 percent of total earnings in 1999 putting it in third place.

County Personal Income and Per Capita Income

Table 9 includes estimates of total personal income (TPI) and per capita personal income (PCPI) for counties, metropolitan and nonmetropolitan areas and the State for the years 1996, 1997, and 1998.

Personal income for the metropolitan counties increased 6.3 percent in 1998 compared to the previous year, while the nonmetropolitan areas had a fairly impressive 5.5 percent gain. In fifty-four of South Dakota's sixty-six counties gains in total personal income outpaced inflation for the 1997 to 1998 period. The remaining twelve counties fell below the 1.6 percent inflation rate for this period.

In 1998, the top five ranked counties by per capita personal income (PCPI) include:

Four of South Dakota' counties had per capita personal incomes that exceeded the national average of $27,203 in 1998. PCPI increased 4.9 percent for the U.S. from 1997 to 1998. Forty-three counties in South Dakota matched or exceeded this rate.

About the author:

Nancy I. Nelson is the Program Manager for the the South Dakota State Data Center at the Business Research Bureau at the School of Business, University of South Dakota in Vermillion.

The assistance of Nancy Craig is gratefully acknowledged.
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Author:Nelson, Nancy I.
Publication:South Dakota Business Review
Geographic Code:1U4SD
Date:Jun 1, 2000

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