By Kurt Metzger
Editor’s note: The Center continues a series of comments from Kurt Metzger of Data Driven Detroit on what the 2010 census results mean for Michigan today, and tomorrow. Metzger worked for the U.S. Census Bureau for 15 years and has been studying demographic data and issues in Michigan for three decades.
The U.S. Bureau of Economic Analysis released 2010 personal income numbers for metropolitan areas on Aug. 9. In a reversal to 2009 results, BEA calculated that personal income rose in all but four of the nation’s 366 metropolitan statistical areas (MSAs), with all of Michigan’s metros falling in the gainers column.
Personal income in the metropolitan portion of the United States overall rose 2.9 percent (not adjusted for inflation) in 2010, after falling 1.9 percent in 2009. Personal income growth in 2010 ranged from a high of 10.1 percent in Elizabethtown, Ky., to a low of -0.9 percent in Grand Junction, Colo.
In 2010, earnings grew 2.3 percent and property income grew 0.6 percent as the metropolitan portion of the United States continued to recover from the recession, which ended in June 2009 (in case you have forgotten). In 2009, these components of personal income fell 4 percent and 6.1 percent, respectively. The growth of personal current transfer receipts (including unemployment compensation and social security benefits) slowed to 7.8 percent in 2010 from 13.7 percent in 2009.
Earnings by industry: Earnings grew in the government sector and in 18 out of 21 private industries in 2010. In two of these industries — professional services and the management of companies — the 2010 earnings increase was sufficient for them to recover from the earnings declines in 2008 and 2009. The health care and educational services industries (which are not cyclical) continued to expand in 2010, growing 3.3 percent and 6.2 percent, respectively. In the other 14 private industries that grew in 2010 (including durable goods manufacturing, nondurable goods manufacturing, and finance) earnings grew 2.8 percent (on average) in 2010 after falling 6.5 percent in 2009.
While entrepreneurship and diversification serve as main components of Michigan’s economic motto, it is manufacturing of both durable and nondurable goods that still sustain us. Their growth is critical for our growth.
Figure 1: Percent Change in Earnings by Industry in Metropolitan Areas, 2008-10
also fell 0.1 percent in the utilities industry, following a 1.4 percent increase in 2009.
(Figure 1, at right, shows the private industry sectors that grew during the 2009-2010 period.)
Earnings by MSA: Private-sector earnings grew in 2010 in each of the 15 largest MSAs in the nation. The Detroit-Warren-Livonia metro ranked 13th in total personal income.
Total earnings growth for these 15 accounted for 48 percent of total private sector earnings in the metropolitan portion of the United States.
The picture for Michigan: The BEA data track 15 metropolitan areas that contain one or more Michigan counties. In addition to total personal income, BEA tracks a number on income components. For the purpose of this analysis, we will look at the three primary components of: net earnings; dividends, interest and rent; and transfer receipts.
The only metro that experienced an overall increase during 2008-09 was Battle Creek at 0.4 percent. This gain was solely attributable to transfer receipts (see definition below) as both earnings and dividends trended negative.
The largest percentage losses among the other 14 were in Detroit and Monroe (both down 4.6 percent) and Ann Arbor and South Bend (both down 4.4 percent). While all four experienced large increases in transfer receipts, they were far outweighed in each cases by losses in both earnings and dividends.
Figure 2: Percent Change in Personal Income for Michigan Metropolitan Areas, 2008-10
The 2009-10 results show a total reversal of fortune for Michigan as all 15 metros experienced personal income increases (see Figure 2), ranging from 2.1 percent for Monroe to 4.2 percent for Niles-Benton Harbor.
(Figure 2, at right, shows the percent change in personal income for Michigan metros, 2008-10)
While universal personal income increases are great news for Michigan, even more important, in my opinion, are the factors that drove the increase.
Net earnings were in the positive column for every area, ranging from a low of 0.7 percent in Flint to a high of 4.3 percent in Niles-Benton Harbor. Eight of the 15 areas experienced personal earnings increases of 2.5 percent or more — all above the national average of 2.3 percent.
Dividends, interest and rent showed marked improvements year to year, although they were still on the negative side (less than 1 percent however) for all but Flint and Muskegon. The national rate was a 0.6 percent increase.
In the area of transfer receipts, all areas showed significant drops — in half or more — and all areas fell below the national average of 7.8 percent. While Michigan’s unemployment rate has remained high (with many dropping off the roles due to extended periods without employment), increases in other areas of the country have resulted in significant increases in their payments. Adding to this are increasing numbers of Social Security recipients, many of whom opted to retire early due to the economic downturn.
While it is obvious from the economic news that every positive story tends to be followed by a reminder that all is not rosy, the data reported in this BEA release are good news for Michigan. The economic success of states is predicated on the success of their metropolitan areas. Michigan is comprised of economic regions that must thrive for the state to thrive. Gov. Rick Snyder understands this concept and has been working with Bruce Katz from the Brookings Institution and Michael Porter from the Initiative for a Competitive Inner City to better position our metro for success.
Let 2010-11 bring even better news!
Table 1: Personal Income for Michigan Metropolitan Areas, 2008-10
Background on personal income: Table 1 displays personal income for Michigan Metropolitan Areas, 2008-10. Personal income is the income received by all persons from all sources. Personal income is the sum of net earnings by place of residence, property income, and personal current transfer receipts.
Net earnings are earnings by place of work (the sum of wage and salary disbursements, supplements to wages and salaries, and proprietors’ income) less contributions for government social insurance, plus an adjustment to convert earnings by place of work to a place-of-residence basis.
Property income is rental income of persons, personal dividend income, and personal interest income. Personal income 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).
Dividends. Payments in cash or other assets, excluding the corporation’s own stock, made by corporations located in the United States and abroad to stockholders who are U.S. residents.
Personal current transfer receipts consist of income payments to persons for which no current services are performed and net insurance settlements. It is the sum of government social benefits and net current transfer receipts from business.
One Comment
Some additional information would be helpful, Kurt. Not everybody wants to or will visit the Bureau of Economic Analysis website to check up on definitions and methods. Thus, you might have pointed out explicitly that the BEA’s definition of “persons” is not the same as the general public’s notion of personhood. For the BEA, persons can be “individuals, nonprofit institutions that primarily serve individuals, private noninsured welfare funds, and private trust funds.” The BEA website is stupefyingly tedious for me and perhaps for all non-economics majors, so I really can’t say much about why the BEA defines personhood this way, other than to point out that this is consistent with SCOTUS rulings granting equal standing as persons to corporations as well as individual people.
Secondly, I’d like to hear something from you about how the major revisions made by the BEA in 2009/2010 to its methodologies may have affected the numbers you report. From what I could comprehend on the BEA website, such revisions occur when there have been significant changes in the sources and quality of the data available for analysis and/or in the analytic methods available. Typically, I gather, revisions made in previously reported data tend to be fairly small, but the dramatic color shifts in your two bar graphs might lead one to hope that the comparisons of 2009-2010 with 20089-2009 are not comparisons of apples and oranges. Interestingly, the apples/oranges metaphor is used by the BEA itself in one of its methodological papers.
Finally, we all know that Michigan was one of the states to sustain significant population decrease between the 2000 and 2010 Decennial Censuses. Do you have access to data that would permit adjustment for population changes in the Michigan MSAs? It could be that some or all of the Michigan MSAs are showing improvement in these aggregate numbers because “persons” with smaller incomes have been selectively moving out of Michigan, leaving behind the “persons” with higher comes. If this in fact happened, the numerical results shown in your charts could look the same even though there was no actual improvement in the economic prospects of the actual people near the bottom of the Michigan food chain. It seems that the BEA doesn’t adjust its data for inflation, and that might be OK for now, when inflation rates are remaining very low. It also seems likely, to me at any rate, that recent population decreases in Michigan have not been randomly distributed among the prosperous and the desperate alike. What do you think?