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Wednesday, August 11, 2010

Incomes Fall in most Metro Areas

The Wall Street Journal

Personal incomes fell across the U.S. last year except in areas with a high concentration of federal government and military jobs, the Commerce Department said Monday. They declined most in places with a lot of housing and finance jobs.

Among the 52 metro areas with populations of more than one million, in only three did both net earnings and the broader measure of personal income both rise.

All three had strong ties to the federal government: the Washington, D.C., area and two areas with a large military presence, San Antonio and Virginia Beach, Va. In all three, the biggest gains were among workers in the federal government and the military; private sector compensation fell.

The same picture was reflected nationally, as private employers froze and in many cases reduced workers' pay and hours.

The only other big metro areas with rising personal incomes—Baltimore and Pittsburgh—had falling net earnings but a sharp increase in government checks, such as unemployment benefits.
There are myriad sources of personal income, the largest being wages and salaries that accounted for just over half—some $6.3 trillion—of U.S. income last year. The balance comes from a combination of investment income like rents and dividends, as well as government payments such as Social Security and disability benefits.

The new data offer the most detailed, ground-level look at the impact of federal government employment and spending last year, highlighting those parts of the country that have received the most benefits and those that have been hit hardest by the drop in private employment. The support of government was reflected nationally last year, with private wages falling 6% in 2009 as government pay rose 2.6%.

Even in the bright spots, gains were only relative. Many of the best-performers had a strong government presence whose workers were less susceptible to the ups and downs of the economy. In other places, the influx of federal transfer payments kept incomes from falling much further than they would have. "It shows the role of federal support programs in helping offset the loss of wages," said Steven Cochrane, an economist at Moody's Analytics.

Among all of the Census Bureau's 366 metropolitan statistical areas—collections of cities or counties that are economically tied to an urban core with at least 50,000 people—personal income declined in 223 areas in 2009. It rose in 134 areas and was unchanged in nine, before adjusting for inflation. The biggest percentage decline in per capita income—8.4%—was in Midland, Texas, where incomes fell with oil prices last year.

Among the 20 areas where per capita personal income fell furthest, six were in Texas, where declines in energy prices slowed oil and gas drilling activity. Still, Texas has fared much better than the rest of the country through the recession and recovery, in part because resource jobs have buoyed employment, especially as oil came off its recession lows through this year. The unemployment rate in Midland, for instance, fell to 5.9% in June from 6.8% in June 2009. The national unemployment rate is 9.5% today.

Among the 134 metro areas that saw personal incomes rise, most of the gains were from big jumps in transfer payments, the Commerce Department said. In the 57 places where earnings increased, many are home to soldiers whose wages are unaffected by the economy. Among the 10 metro areas with the largest personal income growth, seven had a strong military presence, among them Jacksonville, N.C., which houses the Marine Corps' Camp Lejeune and Fayetteville, N.C., home of the Army's Fort Bragg.

In only five metro areas—Kennewick, Wash.; Cumberland, Md.; Morgantown, West V. Va.; Cape Girardeau, Mo.; and Ithaca, N.Y.—did the private sector account for more of the earnings growth. Those gains also had a government component.

The Kennewick area has received a flurry of stimulus money to clean up the Hanford nuclear waste site, some of which flowed to local firms. The other four have either a strong presence in either the heath care or education sectors, which remained the two strongest sectors through the recession. New York City and the Bridgeport-Stamford Connecticut, both leaders in finance, are still among the richest metro areas in the country but saw big declines amid falling bank bonuses last year. Per capita income fell 4.6% in the New York metropolitan area.Bridgeport-Stamford, a hedge fund hub known locally "Wall Street North," remained the country's richest metropolitan area—with per capita income of $73,720 despite a 6.8% decline from a year ago.

Some of the biggest year-over-year personal income drops were in major metro areas in Nevada, Arizona and Florida, which have all seen steep declines in housing prices—and where unemployment is higher than the national average. Nevada's 14.2% unemployment rate is the nation's highest.

Other hard hit areas included several in the industrial Midwest, which saw a precipitous decline in manufacturing jobs in 2009, leading to income declines.

In the Elkhart, Indiana metro area, for instance, per capita income fell 6.5%, the eighth biggest drop in the nation. The area—where unemployment is 17.8% —also saw a 21.4% rise in transfer income, the biggest jump in the nation.

The metro area with the second-highest per capita income was San Francisco, with $59,696. Those with the lowest were McAllen, Texas ($19,720) and Brownsville, Texas ($21,756).