Household Incomes Fell in Five U.S. States in 2008, Census Says

By Timothy R. Homan

Sept. 22 (Bloomberg) -- Five U.S. states that were among the hardest hit by job losses and the construction slump also had declines in household incomes during the first year of the recession, according to a government report.

Arizona, California, Florida, Indiana and Michigan all saw median household incomes drop in 2008, the Census Bureau said yesterday in an annual report. Only one state had a decline the previous year.

The figures highlight concern that consumer spending may hamper a recovery from the worst recession since the 1930s. Falling home values and stock prices have fueled an $11.1 trillion loss in household wealth in the U.S. since the third quarter of 2007, before the recession began.

“Business profits are down considerably, so companies can’t pay the kind of wages that they did” earlier this decade, said Brad Kemp, director of regional economics at Beacon Economics in Los Angeles. “Incomes are going to continue to be affected and be a drag on consumer spending.”

The census report also showed the foreign-born population in the U.S. last year dropped for the first time since 1970, to 37.9 million from 38 million. That same group represented 12.5 percent of the overall population, down from 12.6 percent in 2007. The number of non-citizens also fell, to 21.6 million in 2008 from 21.9 million the previous year.

Nationally, median household income last year fell 3.6 percent to $50,303, snapping three years of increases, the Census Bureau said this month in a separate report.

Maryland had the highest median household income, at $70,545, for the third consecutive year, followed by New Jersey and Connecticut, yesterday’s report showed. Mississippi had the lowest, at $37,790.

Five States Gain

Kansas, Louisiana, New Jersey, New York and Texas had increases in median household income last year compared with 2007. In the previous year, 33 states saw an increase.

Real per capita income for the U.S. as a whole declined by 3.1 percent last year to $26,964, according to an earlier census report.

Workers from the financial services industry to home construction lost their jobs as the recession took a toll. Since the slump began in December 2007, the U.S. has lost 6.9 million jobs. Payroll cuts peaked at 741,000 in January and have since subsided, with 216,000 job losses in August, according to the Labor Department.

California lost 462,000 jobs last year, the most of any state, according to the Labor Department. Florida was next with 375,000 cuts from payrolls, followed by Michigan with 204,000.

Engine of Growth

“The recession hit Florida harder than most states,” said Stan Smith, director of the University of Florida’s Bureau of Economic and Business Research. “Housing was a major engine of growth. The decline in the housing market is a big reason incomes have dropped so much.”

Construction jobs accounted for 29 percent of all job losses in California and Florida, the Labor Department said.

“This has been a very difficult environment,” said Gary Aubuchon, president of Aubuchon Homes in Cape Coral, Florida. Home permits in the Fort Myers area were off as much as 98 percent last year from their peak, he said.

Aubuchon started selling a line of homes for under $200,000 on Labor Day, compared with its prior target of “primarily $400,000 and up,” he said.

In Michigan, declines in manufacturing payrolls contributed 31 percent of all job cuts. Manufacturing accounted for 57 percent of payroll declines in Indiana last year.

Whirlpool Cuts

Whirlpool Corp., the world’s largest appliance maker, is among those companies still eliminating positions. The Benton Harbor, Michigan-based company said Aug. 28 it will close its Evansville, Indiana, manufacturing plant, resulting in the elimination of 1,100 jobs.

Home prices declined 18 percent in 2008, according to the S&P/Case-Shiller home-price index. So far this year, property values have dropped only 4.7 percent.

President Barack Obama in February signed into law a $787 billion stimulus package aimed at stabilizing the economy and creating or saving about 3.5 million jobs. So far, the bill has created or saved as many as 1.1 million jobs, the White House said this month.

A new topic in the American Community Survey by the Census Bureau measured the percentage of state residents who lacked health insurance. In Texas, 24.1 percent went without health care in 2008, while only 4.1 percent in Massachusetts were uninsured, the report showed.

The number of people without health insurance coverage rose to 46.3 million last year from 45.7 million in 2007, the census said this month. The uninsured still accounted for 15.4 percent of the population, the same as in 2007, according to the Census figures.

Insurance Tax Proposal

In order to cut costs and make health care accessible to all Americans, Obama and Democratic lawmakers have proposed taxing private insurers, trimming spending in the federal Medicare program for the elderly and disabled and creating a more affordable public plan to expand coverage.

Data from the census report is used to help determine the annual distribution of more than $400 billion in federal and state funds, the Census Bureau said.

To contact the reporter on this story: Timothy R. Homan in Washington at thoman1@bloomberg.net