Robinson: Wages rise, but Buffalo’s recovery hasn't kept pace - The Buffalo News

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Robinson: Wages rise, but Buffalo’s recovery hasn't kept pace

The Buffalo Niagara job market is tight. But it’s far from hot.

New federal job data is painting a more detailed picture of the local labor market, and that picture has elements of good news and bad news.

The good news is that wage growth is finally starting to heat up after barely rising faster than inflation for most of the last five years, pay jumped in a big way during the first quarter of this year.

The bad news is that job growth, despite all the positive vibes around the Buffalo Niagara economy, still is sluggish. We’re now adding jobs faster than we have during the first part of the recovery, but we still can’t keep up with the pace of hiring across the country. For every two new jobs that are created across the country, the Buffalo Niagara region is adding a little more than one.

So how you look at the local job market depends on whether you want to look at the glass as being half full, or half empty, as Jaison Abel, an economist at the Federal Reserve Bank of New York in Buffalo, explained during a recent economic conference organized by Cornell University Industrial Labor Relations School.

Job growth is slowing

The new job data, based on more detailed and broader filings compiled by the Census Bureau, shows that job growth during the first quarter was even slower than first thought.

The preliminary reports, based on a less comprehensive but more timely survey of companies, indicated that job growth this year started out strong, averaging nearly 1.4 percent during January and February, before rapidly tailing off and nearly stagnating in July and August.

That was disappointing enough. But the new data indicates that the fast start was just an illusion, too. The new data pegs job growth during the first quarter at just under 0.7 percent, which is slower than the region’s job gains during both 2015 and 2016, which were the two best years for job growth in the Buffalo Niagara region during this century.

It also is less than half of the nationwide job growth rate, which is running at a little better than 1.5 percent during the first three months of the year.

 

While economists note that the first-quarter job gains are respectable by local standards, they also say hiring is limited by the short supply of workers. Unless the region can create the kind of new jobs that will entice people to move here, they say growth of around 1 percent a year is about the best you can expect in a market with a stagnant population.

But labor is scarce

What isn’t clear from the latest job numbers is how many people companies would hire if they could find enough qualified workers with the right skills.

“The labor market is continuing to tighten,” said John Slenker, the state Labor Department’s regional economist in Buffalo.

“For decades, it was an employer’s market. That’s not the case anymore,” he said. “What you’re seeing now is that just about everyone who comes through that door [to the unemployment office] has some kind of barrier.”

Those barriers could be a criminal record or a failed drug test. Maybe the lack of a high school diploma. Transportation could be an issue. So could child care.

“How does a single parent get public transportation when they have a 5 a.m. to 5 p.m. shift,” asked Heather Gresham, the executive director of the Buffalo and Erie County Workforce Investment Board.

Over the past five years, the number of unemployed people – defined as workers who are actively looking for a job but can’t find one – has dropped by 40 percent to less than 29,000. That’s only a little more than the pre-recession lows set back in 2006 and 2007, according to Labor Department data released last week.

“What’s been bothering me this summer is that we don’t have a lot of excess labor out there,” Slenker said. “We really need to be attracting more people to the area if we want to continue to grow.”

So pay is starting to rise

For most of the recovery coming out of the Great Recession, the one thing that has been missing has been rising pay.

Despite steady but unspectacular gains in employment and a return to jobless levels of around 5 percent, pay raises have been hard to come by since the recession ended.

That may be changing, though.

With labor in short supply, wages spiked during the first quarter. In the Buffalo Niagara region, the average weekly wage jumped by 7.4 percent during the first quarter to $939 a week, up from $874 during the first quarter of 2016. That was even better than the 6.6 percent increase nationwide.

The 7.4 percent increase – assuming that it isn’t a statistical blip – stands out because it comes after a prolonged period where wages essentially were flat. Average wages rose by just 4.5 percent during the four-year period from 2012 to 2016. If you adjust for inflation, the increase was only a little more than 2 percent.

So the first quarter spike stands out. Even after inflation, last year’s increase in wages – defined as hourly pay times hours worked – was just about as big as the gains during the previous four years.

“We’re starting to feel the effects of some labor constraints,” Slenker said. “We’re getting close to full employment, and that will drive up wages.”

David Robinson is deputy business editor of The Buffalo News. He writes a weekly column on Buffalo's Business.

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