Last week the federal Bureau of Economic Analysis (BEA) released state-level estimates of personal income for the first quarter of 2021. Personal income growth is one of the most widely used measures of the health of a state’s economy.
As the chart below shows, wages and salaries (including stock options and bonuses paid to employees) account for the largest share of the state’s personal income. Benefits include employer-paid contributions for health insurance and pensions. Transfer payments are defined as government payments that don’t represent compensation for services performed by the recipient. Normally dividends, interest, and rent account for the second largest share of income, but this category was considerably smaller than transfer payments in the first quarter.
The next chart shows the growth rates of the various categories of personal income over the past quarter and the past four quarters for both California and the United States. The state’s personal income in the first quarter was 9.3 percent above the fourth quarter of 2020, mainly a function of an increase in federal transfer payments from the December and March federal stimulus bills. California’s quarterly wage and salary growth of 1.4 percent was below the national figure of 2.1 percent, but this was coming off a quarter in which the state’s wages and salaries grew by 6.2 percent compared to 3.9 percent nationally. Over the past four quarters, state wages and salaries are up 5.9 percent, the nation’s just 4.0 percent.