Purchasing Power In Hartford Metro Area Exceptionally Strong

by Categorized: Uncategorized Date:

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

  1. Midland, Texas
  2. Fairfield County
  3. Naples, Fla.
  4. Casper, Wyo.
  5. Vero Beach, Fla.
  6. Cape Cod
  7. Hartford metro
  8. Boston metro
  9. San Francisco metro
  10. 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.

 

The Courant is using Facebook comments on stories. To comment on courant.com articles, sign into Facebook and enter your comment in the field below. Comments will appear in your Facebook News Feed unless you choose otherwise. To report spam or abuse, click the X next to the comment. For guidelines on commenting, click here.

8 thoughts on “Purchasing Power In Hartford Metro Area Exceptionally Strong

  1. Jim N.E. Krickut

    Aaaahaha. So let me see if I read this correctly…If you factor out our horible property tax rates and base housing cost estimates on what people “think” it would cost to rent a place as nice as the one they live in now, we are A-OK. Bwahahahahah. Thanks for giving Rick Perry something to laugh at us even harder about as he departs the state today from his business courtship tour.

    1. Mara Lee Post author

      You didn’t understand the concept. Owner’s equivalent rent does take property taxes into account, because landlords charge rent to cover both their carrying costs and property taxes.
      But thanks for your comment, I have clarified how the owner’s equivalent rent is determined, after reading the BLS explanation of how it’s been done for the last 30 years.

  2. alan

    Nobody would think that Hartford area cost of living is essentially the same as the rest of the country. Something is very wrong with that calculation,,sorry. Also Hartford is where almost all the 60K state workers live not to mention a large base of teachers and public safety in each town. For example, in Bristol, New Brit, Rockville public sector workers live dentists as the private sector pay in those towns is very low so a teacher or police(for ex) can live in the nicest house in town. A large base of public sector pulls Hartford and the entire DC area up in wages

  3. Mara Lee Post author

    If you believe there is something wrong with the calculation, I suggest you email rpp@bea.gov with your reasons why.
    There are many places in America where the cost of living is substantially higher than Tolland, Hartford and Middlesex counties — Boston, much of California, New York City, Westchester County, Northern New Jersey, Fairfield County, New Haven County, Honolulu — and there are many places where it is substantially cheaper to live. When you average all those together, does Hartford end up near the national average? BEA says yes. As I scroll through all 300-something metro areas price indexes, they don’t seem so out of line to me with my knowledge of housing costs and commuting costs in other places I’ve lived or have friends. (Though I wonder about Minneapolis, Baltimore and Ann Arbor relative to us). Go to the link yourself, and see.

  4. alan

    I dont have any time/interest. Your example “Boston, much of California, New York City, Westchester County, Northern New Jersey, Fairfield County, New Haven County, Honolulu” consists of known areas within driving distance plus Hawaii(not sure about “much of” Calif..many cheap areas). If you look at a map and start w/ So virginia, go to Florida, across to Ariz, up to Montana and than across the plains to Minn, south to Arkansas(inc Kent, Tennessese) except for select neighborhoods there is no way these areas are even close to Hartford area).

    1. Joseph

      If you actually lack the “time/interest,” you cede any right to whine about the study. Digging into the methodological rigor of research takes time, interest and, for that matter, skill.

  5. Brian

    Essentially, the latter part of the article undermines the worth of the “study”. It demonstrates how statistical analysis can be misleading, i.e. the exorbitant wealth of the gold coast skues the mean. Likewise, the exclusion of income and sales tax, is by no means, trivial (anyone buy gas in CT lately?). There’s a reason that the exodus of business and people from CT continues.

    1. Joseph

      Since the study was broken down by metro area, the Gold Coast does not “skue” (sic; you meant to write “skew”) the mean for metro Hartford, which was the main subject of the article. It is true that the median would be a better measure if we wanted to avoid the influence of outliers, but in metro Hartford they are much less of a concern.

      Meanwhile, gas is still undertaxed relative to the costs imposed by drivers (see Delucchi et al., 2007), and it has not been adjusted for inflation at the federal level since the mid-1990s. With respect to state and local sales tax, the Tax Foundation ranks CT #31 this year, with a lower combined sales tax burden than such states as Tennessee, Oklahoma, Arkansas, Mississippi, and North Dakota. With respect to state income taxes, CT’s highest marginal rates are lower than those in states including Vermont, Oregon and North Carolina.

Comments are closed.