Income in Minnesota is growing more slowly than the U.S. average because of declines in farm income that are a drag on the entire Midwest, but the typical Minnesotan still makes a lot more money than the average American.
Per capita income rose 2.2 percent in Minnesota in the first quarter of the year to $51,385, according to personal income data released this week by the U.S. Department of Commerce.
The tepid income growth — per capita income nationally grew 3.8 percent over the same period — reflects the sagging farm economy and slower job growth in a state where unemployment is 3.8 percent and employers are struggling to find workers. U.S. unemployment is 4.7 percent.
The growth was roughly in line with Iowa, Nebraska and South Dakota, well better than North Dakota and well behind Wisconsin, Illinois and Michigan.
Per capita income is not the same as median household income, which is available by state only through the end of 2014 from the U.S. Census Bureau.
Here are five lessons from the new data on personal income from the first three months of 2016:
1. Minnesota is catching up to North Dakota on per capita income, mostly because income is falling in North Dakota.
At $51,385, Minnesota’s per capita income is higher than that of all its neighbors except North Dakota, at $52,653. But in North Dakota, personal income declined year over year in the first quarter by 2.8 percent, and it has fallen for six straight quarters.
Income is falling in most industries in North Dakota because of low oil prices and the cooling off of the Oil Patch, with the largest drops in mining and oil and gas extraction, farming, construction and transportation and warehousing.
2. Almost all the growth in Minnesota came from wages, not the stock market.
Income from wages and salaries rose by $1.8 billion. Income from dividends and interest rose $207 million — a small increase historically reflecting financial market volatility.
Income from transfer receipts, which are mostly government assistance, fell by $161 million.
3. Farming is a drag on Midwestern income right now.
Farm income fell in Minnesota by $417 million in the first quarter. The only other sector that saw income fall was mining and oil and gas extraction, in which earnings fell by $30 million. Nationally, farm earnings fell 3.5 percent and that decline was the leading contributor to below-average income growth in five states in the Plains region — Iowa, Minnesota, Nebraska, North Dakota, and South Dakota.
4. Health care, construction and white collar professional and management jobs accounted for more than half of Minnesota’s income growth.
Those four sectors accounted for $1.3 billion in income growth in the first quarter, out of total growth of $2.1 billion. Professional, scientific and technical workers remain in high demand, health care has driven Minnesota job growth for several years now, and construction is nearing its pre-recession high for employment. Those trends are showing up in the income data. Management jobs are not growing dramatically today (they are down slightly from a year ago), but pay for those jobs grew.
5. Income growth doesn’t always correspond directly with job growth.
A good example is the real estate, rentals and leasing industry. The sector has added only 1,800 jobs over the past five years in Minnesota, and yet income in the industry has risen $1.8 billion, or 67 percent. Higher home prices and rental rates mean that the people who are already in the industry saw their paychecks grow.