Personal income soared in the final months of 2004 in the Washington area and nationally, but grew more modestly at the start of 2005. Blame (or thank) Microsoft.
According to the Commerce Department, personal income nationally rose at a seasonally adjusted 3.3 percent in the fourth quarter of 2004, the fastest pace of personal income growth since the first quarter of 2000. It grew 3.6 percent in Maryland and Virginia, and 2.8 percent in the District.
Then the growth in personal income slowed sharply to 0.7 percent nationally in the first three months of 2005, slower than the rate of inflation. It slowed to 1.3 percent in the District and Virginia and 1.2 percent in Maryland.
Why the seesawing? Personal income includes not just the money people take in from wages and government benefits, but investment income as well. The Commerce Department attributes the fourth-quarter spike in personal income largely to a special one-time dividend issued by Microsoft Corp., one of the most widely held stocks, on Dec. 2, 2004. The absence of that $3-per-share dividend, which amounted to about $32 billion, also explains the slower rate of income growth the following quarter.
To eliminate the Microsoft effect, look only at net earnings in each state, a measure limited to wage income, bonuses and such. This measure suggests an acceleration in incomes in the District and Virginia in the first quarter (2.3 percent and 2 percent, respectively), but more modest wage growth in Maryland (up 1.3 percent).
-- Neil Irwin