Economic growth in New York exceeded the rate for most other states between 2003 and 2004, but personal income growth for New York state residents remains below average.
The positive data on economic growth come from Gross State Product (GSP) estimates released this week by the Bureau of Economic Analysis (BEA). Real (inflation-adjusted) GSP in New York was up 5.2 percent last year, compared to a national average of 4.2 percent, the BEA reported. New York ranked a strong 9th among the 50 states in this category.
New York’s economy has grown faster than the national average for three of the past four years. However, due to a severe slump in 2002, the state still has not quite caught up with average growth for all states over the past four years. New York’s GSP increase from 2000 through 2004 was 9.6 percent, good enough for a national ranking of 33rd. The national average during that period was 10 percent.
The less positive data, also released this week by the BEA, are derived from the latest estimates of first-quarter growth in personal income. On a year-over-year basis, personal income in New York rose 6.04 percent during the first quarter, compared to a national rate of 6.40 percent. The state ranked 32nd in this category. New York also trails well behind the national average for personal income growth over the past five and 10 years, respectively.
How to explain the seemingly inconsistent trends in GSP and personal income?
The answer: GSP (which is derived from Gross Domestic Product) measures the production of industries based in New York. This includes the earnings of proprietors, shareholders and employees who live in other states. Such earnings are especially large in the financial sector, which has accounted for much of New York’s recent growth.
Personal income, by comparson, represents the sum of net earnings adjusted for place of residence, along with transfer payments (such as Social Security benefits), and dividends, interest and rent. Capital gains, which form such an important part of securities industry profits, are not included in this total.
Because it is based on the earnings of individuals, personal income is more sensitive than GSP to changes in population and employment growth. New York has been lagging the national average in both those categories, too.
Bottom line: the new data underscore the need to promote growth in all sectors of the New York State economy, and in all regions of the state. But improving New York’s poorly rated economic climate will require Albany politicians to do more — much more — to reduce and reform high taxes, regulations and other factors that raise the cost of doing business in the state.
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