A booming stock market and steady low unemployment both in New Jersey and at the national level suggest a strong and vibrant economy is firmly in place. But a closer look at the pace of personal-income growth in recent years reveals there’s still some room for improvement compared with prior decades.
In New Jersey, personal incomes have grown by only a little more than 1 percent annually since the Great Recession began in late 2007, a rate of growth that’s trailed the national pace of 1.7 percent over the same timeframe, according to The Pew Charitable Trusts.
Over just the last year, personal-income growth in New Jersey has been slightly better than the state’s 10-year pace, with an estimated 1.5 percent increase measured between the first quarter of 2016 and the first quarter of 2017, according to Pew, which analyzed recent federal income data adjusted for inflation. But that’s off from the year before, when the pace of growth over the same timeframe was close to 3 percent.
Nationally, the inflation-adjusted rate of growth in personal income since the Great Recession began is also off the pace of the prior three decades, when the annual growth rate neared 3 percent, according to Pew.
Economists track personal income changes because they typically reflect when an economy is either growing or going through hard times. But the personal-income metric has also been receiving more attention in recent years amid growing concerns about income inequality and the increased concentration of wealth among the very rich.
In Trenton, year-to-year personal-income changes are also followed closely because they can be an indicator of when state tax collections, which are used as a baseline for the annual budget, will rise and fall. In fact, the latest state budget adopted by Gov. Chris Christie and lawmakers calls for an increase in spending during the 2018 fiscal year, with growing salaries and wages listed among the reasons for a positive outlook in budget documents released earlier in the year.
The Pew analysis also noted that personal-income figures are looked at by the federal government when divvying up funding for programs like Medicaid.
According to the most recent jobs figures issued by the federal government, New Jersey’s unemployment rate held firm in June at 4.1 percent, with nearly 52,000 private-sector jobs added during the prior 12 months. Christie, a second-term Republican, has held a series of public events in recent weeks to highlight the state’s improved unemployment rate, claiming tax cuts and other policies he’s enacted since taking office in early 2010 have helped to generate the economic progress.
National unemployment numbers
Meanwhile, the latest U.S. unemployment figures also brought a dose of good news last week, with the federal jobless rate dropping to 4.3 percent as more than 200,000 jobs were added in July. Last week, the Dow Jones Industrial Average also surpassed 22,000 for the first time ever, a milestone that President Donald Trump praised on Twitter.
But even as the recent economic figures provide reason for optimism as the economy continues to expand in the wake of the recession, the Pew data suggests that personal-income growth during the current expansion hasn’t necessarily kept up with the nation’s historical pace of growth.
Over the prior three decades, personal income has grown nationally by the equivalent of an inflation-adjusted 2.7 percent, but the pace has been an estimated 1.7 percent a year since late 2007. And between the first quarter of 2016 and the first quarter of 2017, the national pace of growth was only slightly better, at 1.8 percent.
Among U.S. states, the federal growth rate between the first quarter of 2016 and the first quarter of 2017 was surpassed in 20 states, including neighboring Pennsylvania, which hit 2 percent. But the rate of growth trailed the national pace in New Jersey, at 1.5 percent. Among other nearby states, income growth in New York, Connecticut, and Delaware also trailed the national pace over the past year, with Connecticut doing the worst among that group with a growth rate of just 0.5 percent.
Overall, eight states lost ground between the first quarter of 2016 and the first quarter of 2017, according to Pew. They were West Virgina, Iowa, Vermont, Alaska, Nebraska, Oklahoma, North Dakota, and Wyoming.
Although the recession officially ended in 2009, a total of 36 states, including New Jersey, experienced personal-income declines in 2013. But incomes in most of the states have largely rebounded since then, with Kansas the only state not to experience gains in 2014, and North Dakota and Wyoming the only not to do so in 2015, according to Pew.
For its analysis, Pew used several income sources in addition to paychecks, counting earnings from Social Security, rents, public assistance, and employee contributions to retirement savings and healthcare plans.