Income in Western States Leads Nation : Pattern Suggests Era of Bi-Coastal Economy Is Over

Personal incomes are growing fastest in Western states and slowest in New England, the government said today in a report indicating that the 1980’s phenomenon of the bi-coastal economy is ending.

Eight of the 11 states with fastest income growth between the first quarter of 1989 and the January-March period of this year are located in the West, the Commerce Department said.

The eight had growth rates ranging from Nevada’s 12.2%, the fastest in the United States, to Oregon and California’s 8.2%. That compares to a national average over the period of 6.9%.

Income growth rates in other states in the top 11 include: Hawaii, 9.9%; Alaska, 9.8%; Washington, 9.6%; Idaho, 9.2%; Kansas, 8.9%, and Utah, Florida and Minnesota, 8.4%.

Income growth in New England states, by comparison, was lackluster, ranging from 3.6% in New Hampshire to a near-average 6.8% in Connecticut.

Economists who follow regional patterns said today’s report provided evidence that the bi-coastal economy of the 1980s, in which California and the Northeast enjoyed more prosperity than the nation’s heartland, is over.

“We are returning to an economic pattern that we saw 15 to 20 years ago,” said economist Robert Dye of the Wefa Group, a Bala Cynwyd, Pa., forecasting firm.

Growth has shifted to the Sunbelt states of the West and South and away from the Snow Belt states of the North, he said.

The states with the slowest income growth, in addition to New Hampshire, were: North Dakota, 2.3%; South Dakota, 3%; Montana, 4%; Indiana and Maine, 4.4%; Massachusetts, 4.6%; West Virginia, 4.9%, and Rhode Island, 5%.

By region, incomes in the Far West grew 8.5%; Southeast, 7.2%; Rocky Mountain states, 7.1%; Southwest and Mid-Atlantic states, 7%; Plains states, 6.8%; Great Lakes states, 5.5% and New England, 5.2%.

Economist Mark Zandi of Regional Financial Associates said strong lumber exports, a flood of orders for civilian aircraft to Boeing Co. and heavy migration of Californians looking for a more affordable place to live are fueling growth in the Northwest.

Meanwhile, declines in real estate construction, high-tech companies, defense contracting and banking are crimping New England’s income growth, he said.

Zandi said Florida and California are two high-growth states in danger of cooling off.

Migration and tourism have been supporting the Florida economy, but when national economic growth softens, as it has this year, fewer people take vacations, he said. Also, lackluster real estate markets in the Northeast make it more difficult for retirees to sell their houses and move south, he said.

“California is at risk because . . . housing is extremely unaffordable in most parts of the state. Crime, pollution and congestion are all problems that are going to slow migration flows,” he said.

“You’re probably not going to see a California recession, but you will see much slower growth,” Zandi said.