Monday, November 21, 2016

2015 Personal Income and Forecast Evaluation

Last week, the BEA released its estimates for 2015 local area personal income. Personal income is an aggregate measure of all earnings from wages, investments, etc., and is somewhat comparable to a local area GDP. Good news for the Portland MSA, year over year growth was a strong 6.3%– which surpassed NERC’s already high expectations. There was also an egalitarian flavor to this release, as the growth was basically even among all of the counties.

Table 1: 2015 Total personal income (in thousands)

2015 Total Personal Income
Actual Data
NERC Forecast
Error

Actual YoY Growth
NERC Forecast
Error
Portland MSA, OR
         115,690,881
      114,128,486
-1.4%

6.33%
6.13%
0.20%
Clackamas, OR
           19,901,153
        20,372,335
2.4%

6.28%
5.88%
0.40%
Columbia, OR
            1,926,722
         1,907,389
-1.0%

6.16%
5.14%
1.02%
Multnomah, OR
           38,906,295
        38,705,777
-0.5%

6.11%
5.79%
0.32%
Washington, OR
           29,812,561
        28,133,519
-5.6%

6.81%
6.97%
-0.16%
Yamhill, OR
            3,995,500
         3,902,916
-2.3%

6.88%
5.12%
1.76%
Clark, WA
           20,709,551
        20,602,167
-0.5%

6.07%
5.86%
0.22%
Skamania, WA
               439,099
            440,349
0.3%

3.95%
4.95%
-1.00%
(Note: To calculate the NERC YoY Forecast we used the unrevised estimate for 2014.)

Despite forecasting strong growth, NERC undershot Personal Income by about 1.4%. Considering the significant revisions to nonfarm proprietors’ income - see the bottom of this page for more information – this is an acceptable error. The BEA and other agencies often revise their data as new surveys/measures/methods become available, which improves the precision of the estimates while simultaneously making forecast evaluation much more complicated.

Since our 2014 numbers were lower than the revised 2014 number, and NERC takes this 2014 number as a given base level, the forecast understandably misses low. However, if you simply look at the year-over-year growth – a measure that subdues the influence of base levels and revisions - NERC is much closer (see the right side of Table 1). The figure below shows the amount of revisions to nonfarm proprietors’ income in Washington County.