As measured by the CPI, the cost of living soared just under two years ago by 8% a month, year over the previous year. Almost certainly, the process of the Fed raising rates took that down sharply. In October, the CPI was flat with September. Lost in this analysis is that the cost of living, regardless of inflation, is much less expensive in some states than others.
The state with the lowest cost of living is West Virginia, according to the Missouri Economic Research and Information Center, a division of the Missouri state government. The Council for Community & Economic Research (C2ER) collects the data from cities that provide it on a volunteer basis. That city data is then aggregated to produce state figures. The most recent figures are for the third quarter of this year. The national average is indexed at 100.
West Virginia’s index was lowest at 85.2 last quarter. Only a few states were under 90. These were Mississippi (87.6), Oklahoma (86.8), Kansas (87.4), Alabama (88.2), Missouri (88.3), Arkansas (88.5), Iowa (88.9). Several factors can affect these numbers, including housing costs, transportation, groceries, utility, and healthcare costs. The cheapest city to live in is located in Illinois.
At the far end of the spectrum, Hawaii has an index of 179.2. No other state has an index above 150. The most expensive city to live in is located in Florida.
A low cost of living is almost always married to a low household income. West Virginia ranks next to last based on this yardstick at $51,248. Mississippi ranks at the bottom among all states at $48,716. Hawaii ranks sixth in terms of highest household incomes at $84,957.
What’s the lesson? The cost of living by state cannot be viewed in a vacuum.
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