Inflation has not been an economic problem in the United States since the start of The Great Recession. Despite this, pockets of sharp increases in inflation have developed in several cities around the country. In some, the rate of inflation was three times 2010’s national average of 1.75%. 24/7 Wall St. has identified the ten cities with highest inflation and found several common causes for the high inflation.

Read The Ten Cities With The Highest Inflation

The primary reasons for high inflation in some of the cities are improvements in unemployment rates and substantial population increases. Unlike the rest of the nation, in those cities more people have entered the workforce. This has allowed more residents to put the additional disposable income back into the economy. Population growth has also increased consumer demand in these same cities.

Using a report produced by Moody’s Analytics, 24/7 Wall St. identified the ten cities with the highest inflation rates for 2010. To illustrate the impact inflation can have on local economies, we examined changes in consumer prices, home vacancy rates, unemployment, population change, and median income for the nations 395 metropolitan statistical areas. Data for home vacancies, population, and median income came from the Census Bureau. Unemployment data is from the Bureau of Labor Statistics. For each of these statistics, we also looked at the change from 2009 to 2010. We found that in eight of the cities with the highest inflation, there was also an improvement in the jobless rate. Population grew in nine.

Housing vacancy was examined by city because it is considered to be the most important component of inflation. As a rule vacancy rates should decrease in markets experiencing inflation. However in the cities with the highest inflation, there was little correlation between the two. Vacancy rates fell in only in half of the cities 24/7 examined. There is no ready explanation for this. It may be that an increase in foreclosures or residents abandoning their homes could increase the vacancy rate, despite the high inflaiton. Home values have dropped by more than half in several of the cities, and by much more than that in parts of California, Nevada, and Florida.

This is 24/7 Wall St.’s Ten Cities With The Highest Inflation.

10. Rochester, Minnesota
> 2010 Inflation rate: 3.46%
> Population: 186,302 (up 0.37%)
> 2010 Median income: $59,702 (down 5.4%)
> 2010 Unemployment: 5.6% (down 13.8%)
> 2010 Home vacancy: 7.1% (down 11.2%)

Rochester is one of the fastest growing cities in Minnesota. From 2000 to 2010 the city’s population increased by 24%. The population growth has been driven primarily by the promise of jobs in the city’s health care and education sectors. Between 2000 and 2009, the city added 11,000 jobs. From December 2009 to 2010 alone, unemployment decreased from 6.5% to 5.6%. This is largely a result of the area’s Mayo Clinic, which has spurred the city’s nickname “Med City.”

9. Tallahassee, Florida
> 2010 Inflation: 3.48%
> Population: 368,117 (up 2.14%)
> 2010 Median income: $41,511 (up 3.7%)
> 2010 Unemployment: 8.9% (up 12.7%)
> 2010 Home vacancy: 13% (unchanged)

Tallahassee, Florida has seen a net increase in median income since 2009 of 3.7%. The metropolitan area has the state’s second fastest growing economy. It is home to Florida State University and is a major center for trade and agriculture. In December 2010, the metropolitan area’s unemployment rate was at 8.9%. As of this past August, it declined to 8.8%, while the overall rate for Florida stood at 10.7%.

8. Bloomington-Normal, Illinois
> 2010 Inflation: 3.53%
> Population: 192,696 (up 14.91%)
> 2010 Median income: $59,588 (up 6.3%)
> 2010 Unemployment: 6.8% (down 11.7%)
> 2010 Home vacancy: 11.7% (up 67%)

Bloomington is one of the fastest growing metropolitan areas in Illinois. It is one of the most productive agricultural areas in the country. It is home to two colleges: Illinois State University and Illinois Wesleyan University. State Farm Insurance is also headquartered in Bloomington. Median income has increased 6.3% from 2009 and the unemployment rate fell from 7.7% to 6.8%.

7. Lincoln, Nebraska
> 2010 Inflation: 3.53%
> Population: 303,151 (up 1.8%)
> 2010 Median income: $50,091 (up 4.5%)
> 2010 Unemployment: 3.6% (down 16.3%)
> 2010 Home vacancy: 5.7% (down 5%)

From 2009 to 2010, Lincoln, Nebraska’s median household income increased 4.5%, its unemployment decreased 0.7 percentage points, and its home vacancy rate dropped 5%. City planners expect Lincoln, which ranks No.5 on Forbes’ list of Best Places for Business and Careers, will have double the population it does today by 2060. The metropolitan area’s robust manufacturing industry, which includes Goodyear and Runza National, has kept the economy strong in recent years.

6. Columbia, Missouri
> 2010 Inflation: 3.81%
> Population: 172,319 (up 3.51%)
> 2010 Median income: $40,853 (down 11.9%)
> 2010 Unemployment: 6.2% (up 1.6%)
> 2010 Home vacancy: 7.7% (up 10%)

Columbia is one of the fastest growing metro areas in Missouri. Between 2009 and 2010, its population has increased by 3.51%. The city’s economy has historically been supported by the insurance, health care, and education sectors. Major employers include the University of Missouri and MBS Textbook Exchange.

5. Champaign-Urbana, Illinois
> 2010 Inflation: 3.89%
> Population: 234,445 (up 4.57%)
> 2010 Median income: $45,845 (up 9.7%)
> 2010 Unemployment: 7.8% (down 12.4%)
> 2010 Home vacancy: 10.4% (up 16%)

This metropolitan area is home to the University of Illinois at Urbana-Champaign — its largest employer. It also has a significant number of tech companies. Between 2009 and 2010 the population increased by almost 5%. Median income increased nearly 10%. The unemployment rate fell from 9% to 7.8%.

4. Springfield, Illinois
> 2010 Inflation: 3.97%
> Population: 210,390 (up 1.26%)
> 2010 Median income: $50,423 (down 4.2%)
> 2010 Unemployment: 7.0% (down 13.6%)
> 2010 Home vacancy: 7.6% (down 16%)

Springfield is the capital of Illinois, making the Illinois state government the city’s largest employer. Other major employers are in the health care sector. Between 2009 and 2010, the metropolitan area’s population has increased 1.26%. Over the same period, the unemployment rate decreased from 8.1% to 7.0%

3. Davenport,-Moline-Rock Island, IA-IL
> 2010 Inflation: 4.00%
> Population: 382,382 (up 0.47%)
> 2010 Median income: $46,310 (down 8.2%)
> 2010 Unemployment: 7.8% (down 13.3%)
> 2010 Home vacancy: 7.4% (up 6%)

Davenport, Moline, and Rock Island make up the better part of the Quad Cities. The area’s economy is largely driven by the manufacturing sector. One of the largest employers is tractor and heavy equipment maker John Deere, which is located in Moline. The metro area’s population increased only slightly between 2009 and 2010, and the unemployment rate fell from 9.0% to 7.8%.

2. Fairbanks, Alaska
> 2010 Inflation: 5.13%
> Population: 98,314 (down 0.35%)
> 2010 Median income: $60,785 (down 13.9%)
> 2010 Unemployment: 7.1% (down 4.1%)
> 2010 Home vacancy: 10.5% (down 42%)

Fairbanks is among the fastest growing cities in the country. It has an exceptionally low unemployment rate and large employer base. The city features two U.S. military installations, Fort Wainwright and Eielson Air Force Base, as well as the University of Alaska. From 1990 to 2009, the metropolitan area, which now has a population of just over 98,000, added 16,000 residents. From 2009 to 2010, home vacancy decreased a tremendous 42%.

1. Cumberland, Maryland-West Virginia
> 2010 Inflation: 5.3%
> Population: 103,239 (up 3.51%)
> 2010 Median income: $34,847 (down 3.9%)
> 2010 Unemployment: 8.7% (down 1.1%)
> 2010 Home vacancy: 13.6% (down 3%)

Although Cumberland has one of the lowest median incomes in the country, it has experienced significant growth in recent years. Between 2009 and 2010, the metro area’s population has increased by approximately 3.5%. Over this same period, both home vacancy and unemployment decreased.

Charles Stockdale, Michael Sauter, and Douglas A. McIntyre

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