The State of America’s Private Sector 25: Second Quarter 2011

Last week the U.S. Department of Commerce’s Bureau of Economic Analysis released new personal income data for the second quarter of 2011 by state (pdf) and revisions for the past couple of years. As shown in Chart 1, the U.S. private sector share of personal income for the second quarter of 2011 was at 69.2 percent and has been trending downward since 1990.

Chart Showing Private Sector 2nd Quarter 2011

Note that the private sector is significantly higher than last reported for the first quarter, 2011. The reason is due to the Orwellian American Recovery and Reinvestment Act (ARRA). According to new BEA revisions, “net” ARRA payments are lower than reported previously because “some ARRA funding, such as for Medicaid, replaced state funding and had no net effect on personal current transfer receipts.” As a result, the rebound in the private sector is better than previously reported.

As such, Chart 2 shows that, in the second quarter of 2011, the modified ARRA calculations show that $42.3 billion was pumped into the U.S. economy via personal current transfer receipts (pdf).  This is down from the peak spending ($82.1 billion) under ARRA in the second quarter of 2009.  As ARRA spending continues to wind-down, this will continue to help the U.S. private sector rebound from its all-time lows though it puts a drag on overall personal income growth.

Chart Showing ARRA 2nd Quarter 2011

The State of America’s Private Sector 23: June, 2011

Today the U.S. Department of Commerce’s Bureau of Economic Analysis released their monthly personal income data for June 2011 (pdf).  This is an important update because it contains revisions in the data back to 2003–click here to view the pre-revision data up to May, 2011.

The chart below shows the private sector share of personal income from January 1959 to June 2011. Post-revisions, the drop-off in the private sector was greater than before although the bounce-back is now greater–but it looks like the private sector still ends up in the same place.  So, for June, the private sector share of personal income was 70.49 percent.  This is well below the pre-Great Recession level of 74.48 percent in June 2007.

Chart Showing Private Sector Share of Personal Income Monthly June 2011

And since we have revised data, I have also updated this chart (see below) which shows, on a monthly basis, the contributions paid into Social Security and Medicare (red line) via the payroll tax versus the benefits paid-out by Social Security and Medicare (green line).  Prior to the “Great Recession,” contributions paid-in almost always exceeded the benefits being paid-out.

However, beginning around 2007 and the Great Recession, contributions began to level off.  The decline in contributions was exacerbated by the recent extension of the Bush tax cuts which included a one-year reduction of 2 percentage points in the payroll tax.  So as of June 2011, the gap between benefits paid and contributions is $348 billion.

On the other hand, benefit payments have the looks of becoming an exponential function.  I’ll have to do some more digging around, but I’m guessing a lot of the new growth was due to the Medicare Part D expansion which went into effect in 2006 which coincides with a large lurch upwards in benefit payments.

Chart Showing Growing Gap Between Contributions and Benefits for Social Security and Medicare June 2011

Note: “Supplements to Wages and Salaries” (benefits) in the BEA data are not broken down into “private” sector” versus “government” components. I used the ratio of private wages and salaries to total wages and salaries in order to disaggregate supplements.

The State of America’s Private Sector XXII: May, 2011

Today the U.S. Department of Commerce’s Bureau of Economic Analysis released their monthly personal income data for April 2011 (pdf).

The chart below shows the private sector share of personal income from January 1959 to May 2011.  The private sector share of personal income was virtually unchanged in May to 70.56 percent from 70.55 percent in April.  Not much of  story here this time, except that the private sector is not yet on a path to reclaim its lost ground.

Note: “Supplements to Wages and Salaries” (benefits) in the BEA data are not broken down into “private” sector” versus “government” components. I used the ratio of private wages and salaries to total wages and salaries in order to disaggregate supplements.

Chart of Private Sector Share of Personal Income for May 2011

Social Security and Medicare Go in the Red

From my previous blog post–The State of America’s Private Sector XX: April 2011–I noticed a disturbing trend in some of the underlying data.  But first I had to hit the personal income methodology books at the Bureau of Economic Analysis to make sure I understood all the definitional issues involved.  Now I’m satisfied that what I saw is, in fact, disturbing.

The chart below shows, on a monthly basis, the contributions paid into Social Security and Medicare (red line) via the payroll tax versus the benefits paid-out by Social Security and Medicare (green line).  Prior to the “Great Recession,” contributions paid-in almost always exceeded the benefits being paid-out.

However, beginning around 2007, contributions began to level off.  The decline in contributions was exacerbated by the recent extension of the Bush tax cuts which included a one-year reduction of 2 percentage points in the payroll tax.

On the other hand, benefit payments have the looks of becoming an exponential function.  I’ll have to do some more digging around, but I’m guessing a lot of the new growth was due to the Medicare Part D expansion which went into effect in 2006 which coincides with a large lurch upwards in benefit payments.

At any rate, if you do a quick mental projection of the two lines you get one ugly picture.  And this is on top of a runway federal budget deficit and exponentially growing interest rates . . . ugh, Calgon take me away!

Growing Gap Between Contributions and Benefits for Social Security and Medicare

The State of America’s Private Sector XX: April, 2011

Today the U.S. Department of Commerce’s Bureau of Economic Analysis released their monthly personal income data for April 2011 (pdf).

The chart below shows the private sector share of personal income from January 1959 to April 2011.  The private sector share of personal income increased in April to 70.52 percent from 70.46 percent in March.

The March jump in“government unemployment insurance benefits” (GUIB) fell back in April.  So like the previous jump in GUIB in August, 2010, perhaps the March jump was also a one-time blip.

Interestingly, I just noticed what appears to be a growing divergence in two important line-items within personal income.  I need to do more research into what I think means . . . but if my hunch is correct, then you will want to stay tuned.  I’ll try to work on it over the holiday weekend.

Note: “Supplements to Wages and Salaries” (benefits) in the BEA data are not broken down into “private” sector” versus “government” components. I used the ratio of private wages and salaries to total wages and salaries in order to disaggregate supplements.

Private Sector Sector Share of Personal Income for April 2011