• In 2018, Austin saw strong growth of 6.1% in real (price-adjusted) total personal income, an important, broad-based measure of the economy. Austin's growth was 2^nd best among the 50 largest U.S. metros.
• Austin’s 3.5% real per capita personal income growth in 2018 led most major metros, ranking 10^th.
• Overall price levels in Austin are just 0.2% higher than the U.S. average.
• U.S. inflation was 2.1% in 2018. The rate was 2.0% for Texas and 2.3% for Austin.

Real, price-adjusted estimates of personal income[1] for states and metropolitan areas for 2008-2018 were released by the U.S. Bureau of Economic Analysis in mid-May. Austin saw relatively strong real personal income growth in 2018 (6.1%), and Texas’ growth (4.4%) surpassed the pace of growth nationally (3.4%). Austin’s 6.1% growth places it second among the 50 largest U.S. metros. San Antonio, Houston and Dallas-Ft. Worth grew 4.4% (8^th), 4.0% (14^th), and 3.9% (15^th) respectively. Among major metros, the greatest gain was 6.4% in San Jose, while Denver, Raleigh, and Seattle rounded out the top five. Buffalo had the slowest growth with 0.9%.

On a per capita basis, 2018 real personal income growth was 2.8% nationally and 3.2% in Texas. Among Texas major metros, Austin did best in 2018 with 3.5% growth in real per capita personal income (ranking 10^th). The gain was 2.7% (23^rd) in Houston, 2.6% (25^th) in San Antonio, and 2.1% (35^th) in Dallas-Ft. Worth. All of the 50 largest U.S. metros saw positive growth in 2018, ranging from 0.9% in Buffalo to 6.1% in San Jose.

Austin’s gains over the longer run are also relatively robust. Growth over the last five years is 15.3% (ranking 18^th). Austin’s 22.8% real per capita personal income growth since 2008, before the impact of the Great Recession, ranks 7^th. Over that period, national real per capita income is up 15.9%. San Jose and San Francisco rank 1^st and 2^nd respectively for growth over both the last five years and the last 10 years. Among the top 50 metros, only Charlotte has lower (0.6%) real per capita personal income in 2018 than it did in 2008.

This release of real personal income estimates is the seventh 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 2018 is 100.2, meaning that on average prices are 0.2% higher than the U.S. average. Austin’s nominal or current dollar per capita income is $58,773 in 2018 and Baltimore’s is $62,402. If you divide Austin’s income by 1.002 and you divide Baltimore’s by 1.067 (each metro’s RPP divided by 100), the RPP-adjusted per capita incomes are $58,656 and $58,484 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 2.1% in 2018. Among large metros, inflation ranged from 1.4% in New Orleans to 3.7% in San Francisco. Austin’s rate was 2.3%, and the statewide rate was 2.0%. Austin’s 2.3% increase in prices ranked 17^th highest among the 50 largest metros. Dallas-Ft. Worth’s gain was higher, at 2.6%, while Houston and San Antonio prices increased by 2.1%.

Over 2013-2018, prices increased a total of 7.9% in Austin, compared to the national increase of 6.7%. Austin’s increase ranked 8^th highest among large metros. Houston, Dallas-Ft. Worth, and San Antonio had less inflation than Austin, 7.7%, 7.1% and 6.1% respectively. For inflation over the last five years, San Francisco tops the ranking with 14.6% and Las Vegas ranks 50th with a 3.1% increase.

Austin’s nominal or current dollar per capita personal income is $58,773 in 2018, which is 108% of the national per capita income ($54,526). In the real, price-adjusted series, Austin’s per capita personal income in chained 2012 dollars is $54,680, which is 109% of the national figure ($50,346). 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 2018 is $106,213, which is 195% of the U.S. current dollar per capita income. However, in real, price-adjusted chained 2012 dollars, San Jose’s per capita income is $76,500 and only 152% 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 88.7 (Birmingham) to 131.6 (San Francisco). Austin’s RPP of 100.2 is on the high end of the middle range of the distribution of the 50 largest U.S. metros (20 are higher and 29 are lower) and it is above the RPP for the metropolitan portion of Texas (98.1).

• Goods RPPs have a relatively narrow range of 93.5 (Las Vegas) to 113.2 (San Francisco). Austin’s RPP for goods is 97.4—the same as all Texas metros and below the nation (98.9).
• Rents RPPs range from 69.1 (Birmingham) to 221.3 (San Jose). Austin’s RPP for rents is 120.6, above both the nation (101.9) and Texas metros (98.1).
• Other Services RPPs range from 91.1 (Cincinnati) to 120.7 (New York). Austin’s RPP for other services is 92.6, below both the nation (100.0) and Texas metros (98.8).

The BEA is accelerating the release of real personal income by five months. Therefore, we’ll be able to look for data through 2019 in December instead of a year from now.

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 rents from the Census Bureau's American Community Survey, 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. ↩