Massive DC cheese gave a big boost to Wisconsin incomes. But we lag otherwise.

A report on state incomes came out from the Commerce Department on Thursday, and it had this amazing lead stat.

State personal income increased 34.2 percent at an annual rate in the second quarter of 2020, an acceleration from the 4.1 percent increases in the first quarter, according to estimates released today by the Bureau of Economic Analysis (table 1). Personal income increased in every state and the District of Columbia ranging from 15.3 percent in the District of Columbia to 76.3 percent in Massachusetts.

That 34% increase in income was at the same time that the US economy was shrinking by nearly 32%. On its face, that doesn't make any sense at all, so what happened?

Basically, the plummeting economy led to major handouts from DC to keep people afloat as much of the country was dealing with COVID-related shutdowns.

Transfer receipts. Transfer receipts increased $2.5 trillion for the nation in the second quarter of 2020, after increasing $80.3 billion in the first quarter. The increase in transfer receipts reflected increases in state unemployment insurance compensation, all other transfer receipts and Medicaid benefits (chart 2). Transfer receipts increased in every state, ranging from $3.8 billion in Wyoming to $342.6 billion in California (table 2).

State unemployment compensation was boosted by a $600 increase in weekly benefits provided by the CARES Act, as well as an expansion of eligibility of workers not previously covered by state unemployment compensation programs. The increase in all other transfers reflected $1,200 economic impact payments to individuals, as well as provider relief funds for nonprofit institutions, such as hospitals and health care providers, serving individuals.

That major boost in dollars from DC more than offset a massive decline in earnings.

Earnings. For the nation, earnings decreased 27.5 percent in the second quarter of 2020, after increasing 3.4 percent in the first quarter (table 2). The declines were moderated by PaycheckProtection Program (PPP) loans to proprietors. The decrease in earnings reflected the partial economic shutdown following the outbreak of the COVID-19 pandemic in the first quarter of 2020.

Earnings decreased in 20 of the 24 industries for which BEA prepares quarterly estimates (table 4). Accommodations and food services, and healthcare and social assistance were the leading contributors to the overall earnings decrease. The percent change in earnings across all states ranged from -14.0 percent in Utah to -38.1 percent in Nevada.

As the chart shows above, Wisconsin was slightly below the increase in total income, at 30.4% for Q2. But the state's decline in earnings was also slightly lower than the country as a whole (27.3% decline in Wisconsin vs 27.5% in US). Wisconsin also had a sizable decline in wages that was more than overcome by the major increase in transfer payments.

For both Wisconsin and the US, much of the major increase in income in Q2 will be reversed in Q3, due to the lack of further stimulus checks and the end of the $600-a-week add-on for unemployment benefits. We already got a hint what that might look like with July's personal income report, which showed US income was $1 trillion below April's number (when most of the stimulus was sent out), but also was $1.3 trillion above March's figure.

Looking at a longer-term trend, Wisconsin's income growth was more than 1% below the US's in the 12 months before COVID-19 caused all of these disruptions and changes.

One other item in this "income by state" report was revisions for annual numbers for 2017, 2018 and 2019. Wisconsin's revisions were relatively small for the first 2 years, but there was a sizable downward revision of more than $2 billion for 2019, or 0.66%.

That 3.36% growth isn't so great when you realize these income numbers are not adjusted for inflation. And this was in a time where TrumpWorld was claiming the economy was as good as it could ever get.

While the annual number for 2020 income growth might look good because of stimulus checks and expanded unemployment benefits for several months, you gotta wonder if income will be higher at all in December 2020 than December 2019. In addition to the stimulus being mostly gone, a whole lot of jobs and wages will also be gone compared to the year before, and we'll see what our new baseline ends up being.