The Bureau of Economic Analysis released an estimate of buying power by metro area for the first time ever Thursday, and it reveals exactly how fortunate many Connecticut residents are.
Metro Hartford, which is Middlesex, Tolland and Hartford counties, is barely more costly than the nation as a whole. If the cost of living in the United States is at 100, we’re at 100.9, the BEA says.
The data captures how much it costs to go out to eat, buy cars, clothes and groceries, hire a maid or an accountant, pay medical bills, and all the other goods and services people spend their money on. Each category is weighted, according to what people spend more or less of their money on, so that the agency can capture how inflation affects different regions.
Alissa DeJonge, director of research at Connecticut Economic Resource Center, said she was surprised at first, but when she examined the data, she was impressed by the methodology and said it makes sense.
Housing costs are measured by both rents and by a concept called owners’ equivalent rent – how much you would pay to rent a house as nice as yours. As explained by the federal officials who measure inflation: “It is based on actual market rents collected from a sample of renter-occupied housing units that are identified to be representative of owner-occupied housing.” Because landlords do seek to cover all their carrying costs, including property taxes, this does capture the differences in property taxes in different regions.
This is the flip side of our no-growth economy — when you’re not attracting new workers, landlords can’t raise rents much, so for those here, prices moderate, DeJonge explained.
So, not only is our cost of living not particularly high, we also make a lot more money than the rest of the country. In the Hartford Metro, the amount of money earned divided by every man, woman and child in the three counties, and then adjusted for inflation and cost of living, is 27 percent higher than the national figure.
That gives us the seventh highest purchasing power in the country.
“It seems like a good deal here,” DeJonge said with a laugh, with lower cost of living than New Haven, Philadelphia, Chicago, Anchorage and Santa Cruz, Calif., yet higher earnings than all those places.
There are limitations to the data. The data shows the purchasing power of the average person, for instance, not the person in the middle of the range, so the numbers are pulled up by the highest earners. It also does not take into account state income taxes or sales taxes, and how those vary across regions.
No. 1 is Midland, Texas. Second is Fairfield County. Fairfield County has the highest cost of living in the country, at 122.3, but the average resident there has an income that far eclipses those costs.
Top Ten Metro Areas By Purchasing Power
- Midland, Texas
- Fairfield County
- Naples, Fla.
- Casper, Wyo.
- Vero Beach, Fla.
- Cape Cod
- Hartford metro
- Boston metro
- San Francisco metro
- Silicon Valley
The report also showed the growth in real personal income, adjusted for both inflation and purchasing power.
In 2011, growth in inflation adjusted personal income nationwide was 2.7 percent. In greater Hartford, it was also 2.7 percent, and in the New Haven area, it was 2.6 percent, but it lagged in Fairfield County and in the New London area. In Fairfield County, inflation-adjusted income grew at just .9 percent, and in New London, at 1.7 percent.