By Joe Petrowski

The US occasionally faces a demographic and regional shift that has broad implications for the overall economy. Today, the overall trend is a population shift away from the coasts and toward the West and South. Whether it is driven by the retirement of the baby boomers or the rise of new industries like shale drilling and fracking the trend is unmistakable. The latest manifestation of this trend is the divergence of real disposable income among states. Real disposable income is a metric that the Bureau of Labor Statistics measures and releases that adjusts per capita income for cost of living, so that only discretionary income is measured by states. Real disposable income is what is left over after spending for housing, food and other essential purchases. On a National basis that is $46,000/year with per capita income of $55,000.

The per state real disposable income is extremely illuminating for any retailer, especially those in the convenience sector. States above the national average are:

  • DC                    $56,000
  • N. Dakota       $55,000
  • S. Dakota        $48,000
  • Texas               $48,000
  • Colorado         $47,000
  • Iowa                 $47,000
  • Kansas             $47,000
  • N Mexico         $47,000
  • Oklahoma        $47,000
  • Wyoming         $47,000

States significantly below the average caused in part by high housing costs and high State and local taxes:

  • Illinois               $39,000
  • Washington      $39,000
  • California          $36,000
  • Mississippi        $36,000
  • Alabama            $37,000
  • Georgia              $37,000
  • Louisiana           $37,000
  • Maine                 $37,000
  • West Virginia    $36,000
  • S. Carolina        $35,000
  • Arizona              $34,000
  • Idaho                 $34,000

The other 23 states fall within a few thousand dollars per year of the $46,000 national average.

For those under-performing states, some are dragged down by high cost of living (California and DC) or by industry woes (West Virginia). Some of the higher performers  benefit from low cost of living and an economic boom (North Dakota, Oklahoma, Texas and New Mexico). Florida, at $42,000, has strong income and low taxes but a high cost of living mainly driven by a tight housing market.

Where does retail fit in? With consumer spending almost 70% of GDP real discretionary disposable income is the best indicator of sustainable retail sales growth for every retailer.

 

Joe Petrowski has had a long career in international commodity trading, energy and retail management and public policy development. He currently serves as the fuel director of Yesway convenience stores and an adviser to their Chairman on Operations and Merchandising, as well as a director of Xebec, a Canadian manufacturer of Clean technology and Green Print, a carbon mitigation firm. Petrowski previously served as the president and CEO of Gulf Oil LP and was elected to the Gulf Oil LP Board of Directors and then as CEO of the now combined Gulf Oil and Cumberland Farms. He is Managing Director of Mercantor Partners, a private equity firm investing in convenience and energy distribution.