• In 2021, Austin saw strong growth of 9.3% in real (price-adjusted) total personal income, an important, broad-based measure of the economy. Austin's growth was the best among the 50 largest U.S. metros.
• Austin’s 6.8% real per capita personal income growth in 2021 ranked 3^rd among large metros
• Overall price levels in Austin are at the U.S. average.
• U.S. inflation was 4.0% in 2021. The rate was 3.8% for Texas and 2.9% for Austin.

Real, price-adjusted estimates of personal income[1] for states and metropolitan areas for 2008-2021 were recently released by the U.S. Bureau of Economic Analysis. Austin saw relatively strong real personal income growth in 2021 (9.3%), and Texas’ growth (4.8%) surpassed the pace of growth nationally (3.3%).

Austin’s 9.3% growth places it first among the 50 largest U.S. metros. Dallas-Ft. Worth, San Antonio, and Houston grew 5.6% (8^th), 4.6% (15^th), and 3.2% (29^th) respectively. Among major metros, San Jose, Las Vegas, Tampa, and Phoenix rounded out the top five. Buffalo was the sole major metro with negative growth (0.6%).

On a per capita basis, 2021 real personal income growth was 3.2% nationally and 3.7% in Texas. Among Texas major metros, Austin did best in 2021 with 6.8% growth in real per capita personal income, ranking 4^thnationally among major metros. The gain was 4.2% (17^th) in Dallas-Ft. Worth, 3.2% (26^th) in San Antonio, and 2.2% (38^th) in Houston. All of the 50 largest U.S. metros saw positive growth in real per capita income in 2021, except Buffalo which declined 0.3%.

Austin’s gains over the longer run are also relatively robust. Growth over the last five years is 24.2% (ranking 5^th). Austin’s 36.8% real per capita personal income growth over the last 10 years ranks 7^th. Over that period, national real per capita income is up 27.4%. San Jose and San Francisco rank 1^st and 2^nd respectively for growth over the last year, the last five years, and the last 10 years. Hartford, CT had the slowest growth over the last five years (7.6%) and Houston has the least over the last 10 years (12.0%).

This release of real personal income estimates is the tenth official release of such statistics for metropolitan areas. Something that makes the data particularly innovative and valuable is that the data is not simply inflation-adjusted. The price-adjustments are based on both regional price parities (RPPs) and on BEA’s national Personal Consumption Expenditure (PCE) price index.

RPPs measure geographic differences in the price levels of consumption goods and services relative to the national average,[2] while the PCE price index measures national price changes over time. Using the RPPs in combination with the PCE price index allows for comparisons of the purchasing power of personal income across regions and over time.

According to the BEA, "Americans looking to move or take a job anywhere in the country can compare inflation-adjusted incomes across states and metropolitan areas to better understand how their personal income may be affected by a job change or move. Businesses considering relocating or establishing new plants also now have a comprehensive and consistent measure of differences in the cost of living and the purchasing power of consumers nationwide.”

Austin’s RPP in 2021 is 100.04, meaning that on average prices are essentially the same as the U.S. average. Austin’s nominal or current dollar per capita income is $71,372 in 2021 and Denver’s is $78,150. If you divide Austin’s income by 1.0004 and you divide Denver’s by 1.0916 (each metro’s RPP divided by 100), the RPP-adjusted per capita incomes are $71,343 and $71,592 respectively. That is, the purchasing power of the two incomes is comparable when adjusted by the areas’ differing price levels.

To create real, price-adjusted incomes for a region, current dollar income is divided by the region’s RPP and by the national PCE chain-type price index. The implicit regional price deflator (IRPD) will equal current dollar personal income divided by real personal income in chained dollars.

Thus, the BEA combines RPPs with the national PCE price index to create unique regional price indexes—IRPDs—for each metropolitan area. The growth rate or year-to-year change in the IRPDs is a measure of regional inflation.[3]

U.S. inflation was 4.0% in 2021. Among large metros, inflation ranged from 0.3% in Phoenix to 6.6% in Charlotte. Austin’s rate was 2.9%, and the statewide rate was 3.8%. Austin’s 2.9% increase in prices ranked 39^th highest among the 50 largest metros. Houston’s gain was 3.8% (27^th), while Dallas-Ft. Worth and San Antonio prices increased by 3.5% (ranking 30^thand 31^st).

Over 2016-2021, prices increased a total of 7.8% in Austin, compared to the national increase of 11.0%. Austin’s increase ranked 40^th highest among large metros. Dallas-Ft. Worth (17.2%), San Antonio (8.2%), and Houston (8.0%) had greater inflation than Austin. For inflation over the last five years, Sacramento tops the ranking with 17.9% and Memphis ranks 50^th with a 4.4% increase.

Austin’s nominal or current dollar per capita personal income is $71,372 in 2021, which is 111% of the national per capita income ($64,143). In the real, price-adjusted series, Austin’s per capita personal income in chained 2012 dollars is $61,940, which is 112% of the national figure ($55,477). Among major metros, San Jose has the nation’s highest per capita income, both nominal and real. The current dollar per capita personal income for San Jose in 2021 is $136,338, which is 213% of the U.S. current dollar per capita income. However, in real, price-adjusted chained 2012 dollars, San Jose’s per capita income is $106,026 and only 191% of real U.S. per capita income.

The RPP data made available by the BEA includes separate RPPs for consumption goods and for services, with services broken out into rents and other. Weighting is said to vary by year and is not included with the data, however the BEA notes that states with high (low) RPPs typically have high (low) price levels for rents. Information on price and expenditure-related survey data used and RPP estimating methodologies is detailed here.

Among large metropolitan areas, the All Items RPP ranges from 90.62 (Memphis) to 119.83 (San Francisco). Austin’s RPP of 100.04 is on the high end of the middle range of the distribution of the 50 largest U.S. metros (19 are higher and 30 are lower) and it is above the RPP for the metropolitan portion of Texas (99.33).

• Goods RPPs have a relatively narrow range of 94.03 (Louisville) to 114.91 (Seattle). Austin’s RPP for goods is 96.16—below all Texas metros (98.83) and the nation (99.64).
• Housing RPPs range from 72.12 (Birmingham) to 241.08 (San Jose). Austin’s RPP for housing is 122.48, above both the nation (100.38) and Texas metros (100.26).
• Utilities RPPs range from 71.63 (Salt Lake City) to 167.48 (San Francisco). Austin’s RPP for utilities is 85.51, below both the nation (99.79) and Texas metros (86.00).
• Other Services RPPs range from 91.55 (Las Vegas) to 110.78 (New York). Austin’s RPP for other services is 98.57, below both the nation (100.26) and Texas metros (100.31).

FOOTNOTES:

1. Personal income is the income received by all persons from all sources. Personal income is the sum of net earnings by place of residence, property income, and personal current transfer receipts. ↩
2. RPPs are calculated using price quotes for a wide array of items provided by the Bureau of Labor Statistics Consumer Price Index program, combined with data on housing and utilities from the Census Bureau's American Community Survey and the Energy Information Administration, and with expenditure weighting constructed from the BLS' Consumer Expenditure Survey and the BEA's Personal Consumption Expenditures. ↩
3. The U.S. Bureau of Labor Statistics produces metro area price deflators for a small number of large metros including Dallas and Houston, however, Austin has never been one of these. ↩