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Per Capita Personal Income is calculated as the personal income of the residents of a given area divided by the resident population of the area. In computing per capita personal income, BEA uses the Census Bureau's annual midyear population estimates. Except for college students and other seasonal populations, which are measured on April 1, the population for all years is estimated on July 1.
The local area estimates of per capita personal income should be used cautiously for several reasons. In some instances, the change in the per capita personal income of an area may be the result of unusual conditions. For example, the income of an area may be raised for a year as the result of a bumper crop, or it may be reduced for a year as the result of a hurricane. In other instances, the per capita personal income of an area may reflect the income levels of certain groups of the resident population, but it may not be indicative of the economic well being of the residents of the area. For example, the per capita income of an area may be substantially raised for several years by a major construction project such as a defense facility, power plant, or dam that attracts highly paid workers whose wages and salaries are measured at the construction site. However, this high per capita income may not be indicative of the well being of most of the residents of the area (or, in many cases, of the resident construction workers themselves, because they frequently send a substantial portion of their wages to dependents who live in other areas).
Conversely, the per capita income of an area may be reduced by the presence of a large institutional population like that of a college or a prison, because little income is attributed to the residents of these institutions. However, this low income may not be indicative of the economic well being of most of the residents of the area (or, in many cases, of the institutional populations, because some of these populations, such as college students, typically receive support from their families who live in other areas). Caution must be used where the population changes rapidly.
Per capita income of counties where farm proprietors' income is a large portion of personal income can also be misleading. Farm proprietors' income reflects current production, not current cash flows. Farm proprietors' income excludes sales out of inventories, which are included in current gross receipts, because these sales represent income from a previous year's production, not from current production. Furthermore, farm proprietors' income includes the value of additions to inventories. Therefore, the estimates of farm proprietors' income do not reflect the farmers' attempts to regulate their cash flow by adjusting inventories. In addition, the per capita income of sparsely populated counties that are dependent on farming reacts more sharply to weather and world market demand and to changing government polices affecting agriculture than the per capita income of counties where the sources of income are more diversified.
Net earnings are total earnings less personal contributions for social insurance adjusted to place of residence.
Source: U.S. Bureau of Economic Analysis, Regional Data, (CAINC30).
