An analysis by researchers at the Federal Reserve Bank of St. Louis shows few metropolitan areas can match Northwest Arkansas’ remarkable combination of high income and low cost of living.
The researchers, who shared their calculation at an economics conference this fall, used 2015 Bureau of Economic Analysis data and found that the Fayetteville-Springdale-Rogers Metropolitan Statistical Area ranked No. 11 nationally in per capita personal income if the region’s low cost of living is taken into account.
Northwest Arkansas' “adjusted per capita income” based on a “regional price parity” index created by the Bureau of Economic Analysis is $53,662 per year. The price parity index shows that the cost of goods and services in Northwest Arkansas is about 89 percent of the national average, and it’s that low cost combined with rising income that moves Northwest Arkansas high in the adjusted per capita income ranking.
Northwest Arkansas as a whole and its individual cities continue to earn praise for high economic performance as well as consistently improving quality of life. For example, Money magazine just last week looked at cities with populations between 10,000 and 100,000 residents and considered the economy, cost of living, crime and education to put Fayetteville at No. 7 on its list of the 10 Best Places to Live in the South.
Regarding the analysis, the Midland, Texas metropolitan area finished at No. 1 in the St. Louis Fed’s adjusted per capita income. That economy's cost of living is near the national average, but its per capita personal income of $95,616 in 2015 was driven high by the oil and natural gas industry.
Other metropolitan statistical areas ranked ahead of Northwest Arkansas included two regions in Massachusetts, two in California and two in Florida.
No. 8 Tulsa was the only nearby metro to outperform Northwest Arkansas. While Tulsa’s cost of living is slightly higher than Northwest Arkansas, its per capita personal income is higher.
The Federal Reserve Bank researchers have used per capital personal income and regional price parity to calculate an adjusted per capita personal income since 2008. The Fayetteville-Springdale-Rogers MSA’s ranking in the first three years ranged from No. 52 in 2008 to No. 87 in 2010 among the nation’s more than 380 MSAs, but Northwest Arkansas has moved up the ranking in more recent years.
The region’s No. 37 ranking in 2011 was followed up with top 15 rankings in 2012, 2013, 2014 and 2015. Northwest Arkansas' regional price parity has remained virtually the same in each of those years, but per capita personal income has improved markedly since 2008.
Mervin Jebaraj, interim director of the University of Arkansas Center for Business and Economic Research, said the region’s low cost of living won’t be maintained in future years if affordable housing issues aren’t addressed. Housing prices are rising across the region, he said.
There were a few metropolitan areas within a five-hour drive of Northwest Arkansas that did well in the ranking calculated by the Federal Reserve Bank. Those in the Top 100 included No. 23 St. Louis, No. 35 Wichita, No. 54 Kansas City, No. 66 Shreveport and No. 68 Oklahoma City.
Other metropolitan areas in Arkansas — Little Rock, Fort Smith, Jonesboro, Texarkana and Memphis — have low costs of living, but low per capita personal income prevents any of those areas from being in the Top 100 metros ranked by the Federal Reserve Bank.
Pictured at the top: Experience Fayetteville provided us with the photograph of Dickson Street at night.