When it comes to jobs, it turns out that our gut feeling was right.
New data released last week showed that the Buffalo Niagara job market last year was stronger than the tepid numbers initially reported in January.
In fact, 2016 was the best year for hiring in the last 17 years. And with hiring on the upswing, wages also are on the rise, giving workers a double-dose of good news.
While the cranes and the flurry of construction made it easy to see that something good was happening in the Buffalo Niagara region, the skeptics among us wanted statistical proof that what we were seeing really was different this time.
And until last week, the numbers sometimes told a very different story from the buzz we were feeling in the community. Those numbers initially said 2016 was just another average year in the Buffalo Niagara region, not much different from any of the previous five years, and not even as good as 2011. And nobody looks back on 2011 as the good old days.
Newly revised data that the state Labor Department released last week showed that our gut feeling was right. 2016 will go down as having the Buffalo Niagara region’s strongest job growth since 1999. It was even a little stronger than 2011.
Even better, with the steady wave of hiring pushing unemployment down to around 5 percent and the state’s push to raise the minimum wage driving up earnings for the lowest-paid workers, overall wages are on the upswing, too, rising by 6.1 percent during the third quarter, the federal Bureau of Labor Statistics reported last week.
More jobs means more people working. More people working means more people making – and spending – money. Higher wages also mean those workers have more money to spend, making the ripple effect even stronger.
“I think we have to be pretty happy,” said Gary Keith, M&T Bank’s regional economist in Buffalo. “We grew better than we thought, which is going to pump more through the economy with those paychecks.”
The revised data showed that Buffalo Niagara added jobs at a 1 percent annual pace last year. That was more than 40 percent faster than the 0.7 percent increase that the original set of job data showed.
The private sector work force – essentially everyone who doesn’t work for the government – has grown every month for seven straight years.
But don’t get carried away with glee. That’s good by local standards, but the Buffalo Niagara job market still isn’t growing nearly as fast as the rest of the country, which grew by 1.6 percent last year and hasn’t had the pace of hiring dip below 1 percent during any of the last six years.
Even so, 1 percent job growth is pretty good, especially in a region where the population is stagnant. It’s a lot easier to add jobs when your population is growing, and that’s a big reason why the pace of hiring here almost always is slower than it is nationwide.
“The 1 percent population growth nationally is the difference,” Keith said. “Elsewhere, there’s growth among young families. Here, our problem is that we don’t have enough babies.”
More people usually means more jobs.
“No, we’re not growing as fast as some other areas,” said John Slenker, the Labor Department’s regional economist in Buffalo. “But are we growing faster than we were? I think the answer is definitely, yes.”
“The best way to compare Buffalo, N.Y., is to compare it with Buffalo, N.Y.,” Slenker said. “We’re different from the Sun Belt. We’re different from the West Coast. We are not New York City or Washington, D.C., or Atlanta.”
Those places wouldn’t start buzzing about a tower crane rising above downtown. Big construction projects, like HarborCenter, the SolarCity factory and the growth of the Buffalo Niagara Medical Campus caused a stir here because we hadn’t seen anything like it in decades. In other cities, they’d be just another big development project.
“We’re outpacing our population growth,” Slenker said. “That’s going to attract more workers.”
So why is the Buffalo Niagara job market growing faster? There are a few reasons:
• Our financial services sector is on a roll. Banks like M&T have been expanding nationally, bringing more work to their Buffalo headquarters. The KeyCorp purchase of First Niagara Bank didn’t result in the massive job cuts that were feared.
It also helps that the Buffalo Niagara region is a fairly cheap place for banks and other financial services firms to do back office work, especially compared with places like New York City, Boston or Chicago.
Our average wages in the financial services sector are 11 percent less than the national average for the industry. So it’s not terribly surprising that financial services firms looking to save a few bucks have noticed, to the point where we now have 11 percent more financial services jobs than the typical U.S. metro area.
The growth has been strong and steady, too. Hiring in the financial services sector has topped 3.4 percent annually during each of the past two years – more than three times the growth rate for the entire region.
• The building boom has helped, pushing construction employment to a 25-year high. But even with the building boom, our construction employment still is 16 percent below the national average.
But because our heavier union representation means that average wages are about 8 percent higher than the U.S. norm, that means that each construction job here packs a bigger economic punch.
• The hotel boom is real. New hotels are popping up across the region. The rebirth of downtown Buffalo has spawned dozens of new restaurants and bars. More tourists have been visiting the region.
Put it all together, and it means robust hiring across the region’s leisure and hospitality firms. Hiring grew by 2.7 percent last year, and while those jobs are low-paying – averaging just $455 a week, or 50 percent less than the $890 regional average – the industry’s wages still are 19 percent higher than the national average.
Hiring in the leisure and hospitality sector also has been steadily robust, never dropping below 1.4 percent annually during any of the past seven years.
• Our manufacturing base – long the Achilles heel of the local economy – has finally stabilized. Last year was a tough one for factories nationwide, and it wasn’t any different here. Manufacturing jobs fell by 0.2 percent, making it one of the few local sectors to decline in 2016.
But the bigger picture is much brighter. After decades of decline, the region’s factory employment has been fairly stable – actually it’s grown by about 2 percent – since 2011.
“The last recession really buried a lot of the Old Economy,” Slenker said.
Four decades ago, the steel and auto industries dominated the local economy. Not anymore.
As a result, Slenker thinks the region can keep growing at around 1 percent annually, but to do so means bringing more skilled workers into the labor pool, either by attracting them from elsewhere or convincing discouraged workers that they can find a decent job if they start looking again.
“We’re running out of skilled labor,” he said. “We need more people with more skills.”
Above all, though, how the Buffalo Niagara economy goes depends on how strong the overall economy is.
It’s been eight years since the last recession, and that’s a long time to go without a downturn.
“Buffalo has positioned itself to prosper,” Slenker said. “But it’s still a case where we depend on the rest of the nation and the rest of the world economy.”