Source: Dayton Daily News
Ohio’s per capita personal income rose at one of the fastest rates in the nation last year, another sign that the state’s economy is recovering more quickly than most of the country, according to data analyzed by the Dayton Daily News.
Per capita personal income — which includes all earnings such as wages, dividends, interest income and rents — increased by 1.7 percent to $39,289 between 2011 and 2012. It was a larger increase than all but two other states.
Ohioans on average have a little more money in their pocketbooks, and that leads to more spending, saving, repayment on debt and increased demand for goods and services.
Incomes continue to benefit from the revival of the manufacturing industry and the emergence of the oil and gas sector, experts said. But future prosperity depends on the increasing diversity of Ohio’s industrial base.
“It is good news that our per capita income is increasing at all, and it is even better news that it is increasing so fast,” said James Brock, professor of economics at Miami University. “Ohio for once is leading the country out of recession, rather than lagging it and being last to the recovery party.”
Per capita personal income is the total amount of income earned by a state’s residents divided by the state’s population. Ohio’s 11.5 million residents received $453.6 billion in personal income in 2012.
Personal income is one of the strongest measures of the collective economic wealth of a state, said John Stafford, director of the Community Research Institute at Indiana University – Purdue University Fort Wayne.
“If you were to pick one indicator of economic vitality, it would be per capita personal income and how it changes over time,” he said.
Between 2011 and 2012, per capita personal income in Ohio rose $670 to $39,289, according to inflation-adjusted data released last week by the Bureau of Economic Analysis.
Ohio’s monetary increase in per capita personal income was behind North Dakota (+$3,680) and Minnesota ($745). North Dakota was the only state that experienced a larger percentage increase in personal income (7.6 percent) than Ohio.
Ohio still lags behind 29 states in per capita personal income, but the economic indicator does not account for variations in living costs, which can skew the numbers.
Connecticut topped the list ($58,908), and Mississippi was at the bottom ($33,073). Ohio’s per capita personal income is about 92 percent of the U.S. average.
Personal income is growing in Ohio because unemployment is declining, workers on average are earning a little more and working more hours and companies are more productive, said Brock, with Miami University.
Average weekly hours increased to 34.6 hours in December 2012 from 33.9 in December 2011, according to the U.S. Bureau of Labor Statistics. During that period, average hourly wages for nonfarm, private jobs increased 5 percent to $22.47 per hour.
Between 2011 and 2012, employment in Ohio grew in truck transportation and utilities, retail trade, wholesale trade, construction private services and other industries, data show.
But the resurgence of the auto industry and the manufacturing sector have especially helped Ohio, which is heavily dependent on those parts of the economy, Brock said. Manufacturing employment in Ohio grew 2.7 percent between 2011 and 2012 to about 656,200 workers.
“Manufacturing is a powerhouse right now,” Brock said. “It’s robust, it’s lost weight, it’s vigorous.”
Sales of automobiles plummeted during the recession. But U.S. car sales last year were at the highest since before the recession, which helped put many people back to work, experts said.
Employment among auto parts makers in Ohio grew 7 percent in 2012.
“Growth in per capita personal income captures the rebound primarily of the auto industry in the state,” said Ed Hill, dean of the Maxine Goodman Levin College of Urban Affairs at Cleveland State University.
Per capita personal income is not adjusted for regional costs of living, so it can understate poverty in high-cost areas and overestimate it in low-cost parts of the country, Hill said.
In addition, income is not evenly distributed across income groups, and the gains often disproportionately benefit wealthier residents, he said.
Still, Hill said the indicator remains one of the best measures of economic progress, and it shows Ohioans have a little more money to spend, even though it is unclear how they are using it.
National studies suggest consumers are paying down their debts faster than they did during previous recessions, and they are saving more of their incomes.
The recovery of Ohio’s traditional industrial base has played an important role in the economic growth. But high growth in per capita personal income is associated with innovation and diversification, experts said.
The state and local economies are transitioning from relying primarily on manufacturing to having more investment and output in other high-growth sectors, including information technology, research and development, advanced manufacturing, health care and defense, said Chris Kershner, vice president of public policy and economic development with the Dayton Area Chamber of Commerce.
“Ohio and the Dayton area have done a good job of diversifying their economies so that they can see growth during times like this,” he said. “I think things are definitely headed in the right direction, but there is a ways to go.”
Manufacturing remains crucial to Ohio’s economy, but it also relies on aerospace and aviation, distribution and logistics, biomedical research and development, financial and professional services, and advanced energy and environmental technologies, officials said.
“We are working hard to diversify even more with the belief that when bad times come, one torpedo can’t sink you,” said Rob Nichols, a spokesman for Gov. John Kasich.