A solid Buffalo Niagara economy isn't making us much richer.
In fact, we're essentially treading water.
Our incomes last year grew a little last year – 2 percent to be exact. But that just kept pace with inflation. If you factor in rising consumer prices, the purchasing power of our incomes didn't change a bit, according to new federal data on personal incomes.
That's the bad news, and it's largely a reflection of the lack of wage growth that has persisted throughout the lengthy recovery from the Great Recession. Even though unemployment is low, it hasn't produced the type of healthy pay raises you might expect in a tightening job market.
But there's also a glimmer of good news in our stagnant incomes. Our incomes still rose a little faster than the national average, where incomes on a per-person basis didn't even keep up with inflation.
"Everyone went down. That's the thing," said Gary Keith, M&T Bank's regional economist in Buffalo.
Here are the specifics:
*Personal income in Buffalo Niagara, on a per capita basis, was essentially flat in 2016 after adjusting for inflation. That was the smallest change in real incomes for any year since a 0.7 percent dip in 2013.
Unfortunately, that isn't an unfamiliar development. Since the recession ended, our income growth has been tepid, with the exception of a 3.9 percent increase in 2015 that was the first time in six years that real income growth topped 3 percent.
*In real numbers, our incomes actually fell by $23 last year, after adjusting for inflation. That works out to $46,511 per year.
*To show just how slowly our incomes had been growing, our incomes have grown at an average rate of only about 2 percent a year since the recession ended in 2009.
*On a more encouraging note, our personal incomes in the Buffalo Niagara region grew faster than the national average, where per capita incomes fell by 0.3 percent during 2016 after adjusting for inflation. It was the fifth time in the last eight years that per capita incomes in the Buffalo Niagara region grew faster than the national average.
That put the Buffalo Niagara region in the top half among the nation’s 382 biggest metro areas for income gains, ranking in a tie for 169th.
What makes the income data so important is that spending by consumers makes up about 70 percent of all domestic economic activity. The more consumers have to spend, the more robust the economy will be. And how much they have to spend depends, in large part, on how fast their incomes are growing.
Rising incomes mean more purchases at the mall, maybe an extra trip to the movies or an extra dinner out. For the truly frugal among us, it even could mean a little bigger cushion in our savings account.
Our incomes come from a variety of sources. Wages and salaries are the biggest part, but things like dividends, pensions and social services payments also help determine how much money we have.
Despite the continued tight job market, our wages and salaries last year were virtually stagnant. After adjusting for inflation, our annual wages per job actually fell last year by 0.4 percent, or about $160 a year.
That's especially disappointing because wages and salaries had shown signs of breaking out of their doldrums during 2014 and 2015, rising by more than 5 percent over those two years.
What's surprising is that the same forces that helped push up wages and salaries modestly in 2014 and 2015 – modest hiring, a shrinking local labor force as Baby Boomers retire and the region’s stagnant overall population – all continued into 2016.
Keith, however, noted that wages and salaries held up better in the Buffalo Niagara region than they did nationally in 2016.
"You can be disappointed in that, but that's not on us. That's on the country," Keith said.
"When we beat the large metro area average, to me, that's a win for us," he said. "If we can continue to at or above the large metro area average going forward, we're going to change the dynamic here, because for a long time, we were falling behind."
But there are plenty of ebbs and flows within the job market.
The Buffalo Niagara housing market is hotter than it's been in decades, and that translated into a second straight year of strong income growth for workers in the real estate sector, with the average income per job jumping by 10 percent. The growth in the local banking and financial services sector led to a 4 percent increase in average earnings per job last year, after adjusting for inflation. The surge in new restaurant and hotel openings – along with a rising minimum wage – contributed to a 4.7 percent rise in income per job within the leisure and hospitality sector.
But it was a different story for other workers. The average income per job within the struggling retail sector fell by 1.7 percent during 2016. It was down by 0.8 percent in the wholesale trade sector that was hurt by a handful of major warehouse closings last year.
A report last week from the U.S. Bureau of Labor Statistics provided further evidence that earnings growth remains subdued across the Buffalo Niagara region.
That report, which measures average weekly wages, grew much more slowly during the second quarter than they did during the first, dashing hopes that earnings were finally starting to rise at a more robust pace. Instead, the new report makes it look more likely that the rapid first-quarter wage growth was more of an outlier than a sign of a trend toward bigger paychecks.
The data showed the average weekly wage in the Buffalo Niagara region grew by 2.4 percent during the second quarter after spiking by 7.4 percent in the first three months of the year. Weekly wages nationwide – which are influenced by hourly pay and hours worked – grew by 3.2 percent in the second quarter after rising by 6.6 percent in the first three months of this year. Those figures are not adjusted for inflation.
That puts local wage growth during the first half of the year roughly on par with the national increase. And keeping pace on pay is a good thing.