If you look outside, it finally seems like winter is starting to ease its grasp on the Buffalo Niagara region.
If you look at your paycheck, you just might see some early signs that the death grip the boss has held on the company’s purse strings ever since the recession hit more than seven years ago is finally starting to loosen.
Our wages, believe it or not, are on pace to grow faster this year than they have in any other year since 2007, according to new federal data.
Through the first nine months of last year, our average weekly wages rose by 2.7 percent, according to the U.S. Bureau of Economic Analysis. You have to go all the way back to 2007, when wages grew by 3.9 percent, to find a year when worker pay increased faster.
What’s nice about that is, after inflation, wages here are still up about 1.1 percent, or about $9 a week. In other words, we’re getting a real, honest-to-goodness pay raise.
We’re not going to get rich off it, by any means. It’s not quite enough to pay for a movie ticket, but it would cover a value meal at most fast-food restaurants of your choice. And after the last few years, with stagnant wages forcing workers to pinch their pennies a little tighter, it’s still a nice treat.
That’s because until last year, inflation has been eating up the paltry raises we’ve been getting. From 2010 to 2013, our real wages actually went down a little less than 1 percent after you account for the rising cost of living. For someone earning the average weekly wage, that means the purchasing power of your paycheck went down by about $6 a week from 2010 to 2013.
And now it’s bouncing back – a reflection of our tightening labor market, where modest, but steady job growth is combining with a shrinking labor pool as older workers retire to push down what had been a stubbornly high unemployment rate to more palatable levels.
“I get a sense that the tightening labor market is putting some pressure on employers to pay higher wages,” said Gary Keith, the regional economist for M&T Bank in Buffalo.
A recent M&T survey of executives found that almost a third were increasing wages for their existing employees, while about a quarter were boosting starting pay for new workers – both signs that employers are starting to feel pressure to increase pay levels.
That’s something that has been noticeably absent from the labor market since the Great Recession hit.
It’s also not surprising, said John Slenker, the state Labor Department’s regional economist in Buffalo.
As an economy rebounds from a recession, one of the last things to bounce back is the job market. That’s because, after scrambling to cut costs during the downturn, businesses are understandably skeptical when the economy starts to rebound. They generally try to squeeze as much as they can out of the productivity improvements they made during the recession before they start hiring again.
As a result, job growth is one of the last things to pick up during a recovery. We’re in that stage now, with job growth locally running at about a 1 percent annual pace. That’s not as fast as the rest of the country is growing, but it’s respectable growth by Buffalo standards. And as hiring has heated up, our unemployment rate has come down significantly, from 9.2 percent in January 2013 to 6.7 percent in January 2015.
“When you come out of a recession, there isn’t much upward pressure on wages because you’ve got this large pool of workers who need to be reabsorbed into the workforce,” Slenker said. “There’s always someone else to take a job.”
But with the pool of unemployed workers shrinking, employers looking to hire are finding the competition a little tougher to find new employees. And that gives them an incentive to offer a little sweetener in paychecks, which typically is the last thing to happen as an economy completes its recovery.
“The one thing we hadn’t been seeing was employers offering higher wages,” Keith said.
The latest wage data bears that out. Last summer, the average weekly wage in Erie County rose to $836, up about 3 percent from $812 during the third quarter of 2013. It was the fastest growth in weekly wages during any quarter in the last 2½ years and extended the uptick in the pace of wage growth that has been taking hold throughout 2014.
“Before, you didn’t have this upward pressure on wages,” Slenker said. “Now, we’re actually at a point where we can see wages rising.”
The rising wages are relatively widespread throughout local industries, and in some cases, the raises over the past year come close to matching the increases workers received during the previous five years combined. Construction workers, for instance, saw a 5.7 percent increase in their average weekly wages from the third quarter of 2013 to the third quarter of 2014. From 2008 to 2013, their weekly wages grew by a total of 6.6 percent.
That shows the impact that the big new construction projects, from the HarborCenter to the new Delaware North headquarters and hotel complex at 250 Delaware Ave., are having on the building trades, Keith said.
Manufacturing wages grew by 1.3 percent over the last year, after rising by just 1.4 percent from 2008 to 2013, despite continued job losses.
“We’re starting to see some of the better growth in some of the higher wage jobs,” Keith said.
And after suffering through such a long period of stagnant wages, that’s a welcome change for workers throughout the Buffalo Niagara region.
“A lot of people have been waiting for this to happen,” Slenker said.