California is back. After five years of economic weakness, personal incomes in America’s most populous state shot up 6 percent in 1995, putting it in the top 10 for income growth along with four other Western states.
At the other end of the scale, South Dakota and North Dakota ranked dead last. Because of a precipitous drop in farm incomes, per capita incomes actually fell by 0.3 percent in South Dakota and rose a barely perceptible 0.3 percent in North Dakota.
Nationally, per capita incomes increased by 5 percent in 1995, the best performance since a 5.5 percent rise in 1990, according to the report Thursday from the Commerce Department.
Outside the West, the big gainers were scattered across the country, with Louisiana posting the biggest increase of any state, a rise of 6.9 percent.
But by region, the West was the clear standout, with per capita incomes up 6.6 percent in Arizona, 6.2 percent in Oregon, 6.1 percent in Utah and 6 percent in both California and New Mexico.
While many Western states have been doing well for some time, California has been in the doldrums since the 1990-91 recession. Per capita income increases in California were up just 2.1 percent in 1994 and 1.1 percent in 1993, far below the rate of inflation during those years, meaning Californians’ buying power was falling behind.
California’s newfound strength, though, does not necessarily bode well for Washington and Idaho. A significant factor in the dynamism of the Washington and Idaho economies during the first half of the decade has been population growth fueled by inmigration from California.
And a lot of those California refugees were fleeing the economic doldrums there.
John Mitchell, chief economist for Portland-based U.S. Bancorp, said an improving economy means that California out-migration is decreasing.
“Clearly that has been happening in Washington and Idaho,” Mitchell said Thursday.
Those states issue summaries of new drivers’ licenses issued each month, along with statistics on what states those new Washington and Oregon drivers came from. And the numbers of Californians getting Washington licenses have steadily declined over the past couple of years.
But, Mitchell said, Both Washington and Idaho have already absorbed a lot of the decline. And both states are showing enough renewed economic strength that further declines in California inmigration shouldn’t create significant problems.
“Washington has been through a period of relatively weak growth,” Mitchell said, “and that’s in the process of ending. Aerospace is picking up, and that has been a significant drag. You’re going to be all right.”
Analysts said California is showing benefits from the weaker dollar, which helped lift America’s exports last year, especially with Asia.
“The depression times are over for California and the good times are back,” said Allen Sinai, economist at Lehman Brothers in New York. “California is our No. 1 exporting state and the economic growth in Asia is benefiting trade and tourism in the state.”
Analysts said the rise in exports was helping to boost employment as well as incomes in California.
“Currently employment in California is growing faster than the national average, something that hasn’t occurred since 1990,” said Paul Getman, an economist at Regional Financial Associates, an economic consulting firm in West Chester, Pa., that specializes in state economic analysis.
Getman said that other Western states had in some ways benefited from California’s problems in the early 1990s as laid-off workers in defense and other industries traveled to neighboring states to look for work.
He said many Western states have been able to attract foreign investment, especially in high-tech industries such as computers, and this was paying off in faster income growth.
“Because of the weaker dollar, a lot of foreign manufacturing firms are opening plants in the United States and they are choosing to do so out West because the cost of doing business there is lower than in the East,” Getman said.
Outside the five states in the West and Louisiana, the other four states in the top 10 in income growth were Michigan, New Hampshire, Rhode Island, all with gains of 6.2 percent, and South Carolina, with an increase of 6.1 percent.
In the bottom 12, after South Dakota and North Dakota, were Hawaii, up 2.9 percent; Oklahoma, up 3.1 percent; Alaska, up 3.2 percent; Arkansas, up 3.6 percent; Montana, up 3.7 percent; Minnesota, up 3.9 percent; and New Jersey, up 4 percent, followed by three states tied with 4.1 percent gains - New York, Vermont and Iowa.
As usual, the state with the highest per capita income was Connecticut, at $30,303, an increase of 4.3 percent last year. Mississippi again ranked as the state with the lowest per capita income, at $16,531, an increase of 4.7 percent from 1994.
, DataTimes MEMO: This sidebar appeared with the story: REGIONAL GROWTH SLOWS Income growth in Washington, Idaho and Montana fell in 1995 after posting impressive gains earlier this decade. Idaho’s 1995 growth rate of 4.7 was just under the national average of 5.0 percent, but that ranked the Gem State just 33rd. In the boom years of 1993 and 1994, the state had been ranked among the highest in income growth. Washington’s biggest spurt came in the late ‘80s. Its 1995 rate of 4.9 percent ranked it 25th in the nation. Washington continues to have the highest per capita income, $23,639, of the three states. Montana ranked 44th in the nation with income growth of only 3.7 percent.