WACO, Texas – Overall Texas earnings are rising faster than those of any other state.

For the second quarter in a row, the Bureau of Economic Analysis (BEA—part of the US Department of Commerce) found that earnings growth here surpassed the gains in all other states. Economic strength is certainly the root of this good news, with all major industrial sectors showing increases.

The BEA looked at “personal income,” which is income received by all persons from all sources. It includes earnings from wages and salaries as well as proprietors’ income, property rental income, dividends, and interest. It is measured before personal income taxes and other personal taxes, though contributions for government social insurance are excluded. No adjustments are made for inflation.

Total US personal income rose by an estimated $149.0 billion between the first and second quarters of this year. The increase in Texas was $19.2 billion, with California next at $16.9 billion. This is particularly noteworthy in that California started from a larger base, and the pace of income growth in that state (at 1.5 percent) was significantly slower than in Texas (with 2.0 percent).

Looking at the pace of expansion (rather than the overall size of gains), Texas ranked sixth. The states growing faster are generally smaller economies with a surge of oil and gas exploration and production (such as North Dakota). For Texas income to expand by 2.0 percent in a quarter given the large and diverse economy here is an impressive feat.

Nationally, virtually all industries tracked by the BEA (22 of 24) contributed to the gains. Earnings in the health care segment were up $17.4 billion, and professional services were a close second with $17.1 billion. Retail trade and durable goods manufacturing rounded out the top sectors. Durable goods manufacturing was the largest component of earnings growth in 15 states; expansion in a basic sector is particularly good news in that industries such as manufacturing tend to have relatively high multipliers (meaning that they generate a lot of activity in related businesses supplying necessary input goods and services).

For Texas, the only segments of the economy with earnings declines between the first and second quarters of this year were the military, civilian federal employees, and a miscellaneous category of services. Among the non-farm sectors, the largest gains were wholesale trade; real estate and rental and leasing; administrative and waste management services; management; and professional, scientific, and technical services.

The Lone Star State still compares favorably when looking at a somewhat longer period of growth. Between 2011 and 2013, total personal income in Texas grew by $108.4 billion. That gain is just over 10.3 percent and significantly better than the nation as a whole (7.3 percent). The only state with more rapid advancement was North Dakota, where personal income was up almost 17.4 percent. While impressive, North Dakota is a case of a small economy with a rapid energy-sector driven expansion, and the overall gain was less than $5.7 billion. Utah (also a relatively small economy) came in just below Texas; California and Wyoming (at 10.1 percent) were the only other states to top the 10% growth threshold.

Personal income data is critical in analyzing economic conditions. After all, an overarching goal of business activity is to generate money for business owners and employees. The data is also used by federal government agencies in decisions regarding fund allocation and matching grants to states. Research organizations, economists, and many others look to trends in personal income to draw conclusions regarding the well-being of the populace, efficacy of public policy, and many other topics. Additionally, personal income is the source for most of the money used in for consumer spending, which drives about two-thirds of the U.S. economy.

The fact that Texas is gaining ground in earnings is good news. Even so, the state remains in the middle of the pack on a per-capita basis. While our relatively lower cost of living helps to some extent, there is still room for improvement. To move ahead, we need to prepare our young people for the well-paying jobs of the future. We also need to continue to attract industries which enhance prosperity. We’re going in the right direction in terms of personal income in Texas, but we need to keep moving.

Dr. M. Ray Perryman is President and Chief Executive Officer of The Perryman Group (www.perrymangroup.com). He also serves as Institute Distinguished Professor of Economic Theory and Method at the International Institute for Advanced Studies.