Hawaii, New Jersey, California Among States With Highest Cost of Living Increases in 2020

By Nathalie Voit

The cost of living increased substantially in 2020 in places like Hawaii, the District of Columbia, and New Jersey, the U.S. Bureau of Economic Analysis said in a news release on Dec. 14.

Regional price parities (RPPs), which measure the difference in price levels across states relative to the national average, were the highest in Hawaii (112.0), New Jersey (111.2), and California (110.4) in 2020. The District of Columbia ranked second overall at 111.5, the bureau said.

RPPs in Mississippi (87.8), West Virginia (88.0), and Arkansas (89.2) were the lowest, signifying greater consumer purchasing power in those states.

Regarding housing rent, California was the state with the highest RPP at 160.2, while Mississippi had the lowest at 56.1. The RPP for housing rents in the District of Columbia was 168.9.

The bureau also measured real personal consumption expenditures (PCE) by state. Real PCE tracks levels of consumer spending in the U.S. Falling PCE typically reflects inflation as consumers are buying less to cope with rising costs.

Real PCE nationwide fell 3.8% in 2020 after climbing 2.2% in 2019, reflecting strong inflation across a broad range of goods and services at the national level. Only three states exhibited increases in real PCE: Utah (+2.2%), Idaho (+2.0%), and Montana (+1.0%).

Real PCE decreased in 47 states and the District of Columbia, with New York, Maryland, and Hawaii reporting the most significant drops at -0.7 percent. Real PCE in the District of Columbia fell 8.9%.

The bureau also tracked real personal income by state, or personal income adjusted for inflation and cost of living differences between states. The bureau said that real personal income levels nationwide rose 5.3% after rising 2.6% in 2019. States with the greatest income gains in 2020 were Idaho (9.8%) and Utah (9.0%), places where costs for consumers decreased on net.

According to BEA data, states with the lowest income gains in 2020 were Alaska (1.6%) and Oklahoma (1.7%), places that both reported an increase in their implicit regional price deflators.