Americans' personal income soared in 2021
The personal income of many Americans increased substantially in 2021, despite the COVID-19 pandemic that created record unemployment and had scores of people isolating at home amid social distancing measures.
Residents who live in non-metropolitan areas of the United States experienced a 7.7% personal income increase last year, while the income of urban residents jumped about 7.4%, according to a just published report from the Bureau of Economic Analysis (BEA).
What BEA’s preliminary report means
The personal income estimates provided by the BEA report released yesterday are merely a “first glimpse” of income information for 2021. More complete data is scheduled to be released in mid-December.
Still, the initial figures show that income increased in a whopping 3,075 counties across the country last year and decreased in a mere 36 counties. Income remained unchanged in three counties.
The personal income increase for the United States as a whole was 7.5% in 2021 compared to an increase of 6.7% in 2020—marking a notable upward trend. For just the metropolitan regions of the country, the personal income increase for 2021 was 7.4%, up from a 6.5% increase in 2020.
And while residents of non-metropolitan areas also experienced income growth in 2021 (7.7%), it was somewhat slower than the income growth experienced in 2020 when such regions experienced a 7.8% uptick.
Per capita income increases
The new report also shines a light on per capita income growth, which is slightly different then simple personal income growth. Per capita figures are calculated based on personal income figures divided by population numbers.
By this measure, the overall income increases for the country were 7.3% in 2021, up from 6.2% in 2020. Metropolitan regions of the United States experienced the most significant per capita jump year over year rising from 6% in 2020 to an income increase of 7.3% in 2021. And here again, non-metropolitan areas saw income growth levels start to slow year over year—declining from a growth rate of 7.9% in 2020 to 7.5% in 2021.
“Overall, the increases in personal income in 2021 were primarily due to increases in earnings, which reflected the continued reopening of the economy following the onset of the COVID-19 pandemic in the first quarter of 2020,” says Paul Medzerian, a regional economist at BEA. “The personal income increases also reflect continued payments from pandemic response legislation, including the Coronavirus Response and Relief Supplemental Appropriations Act and the American Rescue Plan Act.”
Personal income increases: non-metropolitan vs. metropolitan areas
The overall income growth figures however, don’t tell the full story. Levels of income growth vary significantly around the country.
For instance, in metropolitan counties, the personal income growth for 2021 ranged from a high of 34.9% in Lynn County, Texas to a low of -1.8% in Power County, Idaho. Meanwhile, in non-metropolitan regions the range includes a high of 60.9% income growth in Throckmorton County, Texas in 2021 to a low of -12.2% in Chouteau County, Montana.
The metropolitan areas that experienced the most significant per capita income change between 2020 and 2021 are:
- Midland, TX: 14.8% increase
- Abilene, TX: 12.9% increase
- San Jose-Sunnyvale-Santa Clara, CA: 12.9% increase
- San Francisco-Oakland-Berkeley, CA:
- Vallejo, CA: 12.1% increase
- Stockton, CA: 12.1% increase
- Elkhart-Goshen, IN: 11.5% increase
- Brownsville-Harlingen, TX: 11.2% increase
- Kankakee, IL: 11.1% increase
- Grants Pass, OR: 11.0% increase
4 things to do with your increased income
For those experiencing increased income, particularly disposable income, it’s important to manage the money wisely and avoid lifestyle creep, which means spending more because you’re earning more. Here are a few ways to handle increased income:
- Invest: Increased income can stretch even further when you invest it wisely. Experts recommend investing at least 15% of your post-tax income. This could include stocks, bonds, money market accounts or an investment mix that is right for you and your short-term and long-term needs.
- Build an emergency fund: You might also consider putting a portion of your increased earnings in savings to create an emergency fund for unexpected expenses. Taking this step can help you avoid going into debt or relying on credit cards when emergencies arise.
- Pay down debt: With interest rates rising substantially over the past year, carrying a revolving balance on credit cards is a costly proposition. If you have extra income, dedicating a portion of it to knocking out credit card bills can be a wise way to get ahead.
- Invest in long-term goals: Have you been wanting to go back to school and obtain an advanced degree in order to get ahead professionally? Or perhaps learn computer skills? Or some other skill or trade that may be lucrative? Using extra income to invest in yourself is another good way to make your newfound income pay dividends.