Better days are making it a little easier for folks in the Buffalo Niagara region to make ends meet.
But not by a lot.
While the positive vibes about a rebounding Buffalo Niagara region began to take hold last year, those good feelings didn’t translate into a big boost in our incomes.
They went up, even after you account for inflation, and that’s a good thing. But the increase wasn’t anything to get terribly excited about.
Here are the details:
Our per capita personal incomes grew by 1.4 percent last year, rebounding from a disappointing 2013 that saw incomes our incomes actually go down by 0.8 percent after taking inflation into account, according to new data from the U.S. Bureau of Economic Analysis.
In real numbers, that means our incomes grew by $582 per person last year, after inflation, to an average of $43,676. That’s a little more than $11 a week in added spending power.
“This is meaningful to people. This is the stuff that’s in their pockets,” said Gary D. Keith, M&T Bank’s regional economist in Buffalo. “If you have this much more income in you’re pockets, and you’re beating inflation, that’s important.”
So 2014 was a year of improving incomes. Just not a year of rapidly improving incomes, since our gains were only about two-thirds as big as the 2 percent increase in incomes across the country.
The income data are important because 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 on how fast their incomes are growing.
Rising incomes mean more purchases at the mall, maybe an extra trip to a fast-food joint, or for the truly fastidious among us, a little bigger cushion in our savings account.
“It’s a real increase in people’s spending power,” Keith said. “It’s a nice story.”
But it’s not the kind of story that merits a big celebration. After all, the growth in per capita personal incomes here only ranked in a tie for 74th among the 100 biggest U.S. metro areas. In other words, there are plenty of other places where incomes are growing faster.
“We’re going to look a little less positive because we’re behind the nation in top line growth,” Keith said. “We’re not going to be San Jose or Denver. We just don’t have the population growth.”
Our incomes come from a variety of sources. Wages and salaries are a big part of the equation, but things like dividends, pensions and social services payments also help determine how much money we have. In 2014, our wages and salaries started to rebound in step with the local job market. After adjusting for inflation, our wages and salaries grew by 2.1 percent, reflecting the uptick in hiring and the corresponding drop in the local unemployment rate. It was the strongest increase since 2006.
Likewise, as more people held jobs, unemployment insurance payments became a much less important part of the income pie, falling by 49 percent and returning to the levels they were at before the recession hit in 2007.
If you take a look over a longer period, our income growth looks a lot better. Since 2007, our per capita incomes have grown by nearly 24 percent, not counting inflation. That ranks third among the 100 biggest U.S. metro areas, trailing only Tulsa, Okla., and Bakersfield, Calif. A big reason for that is the mild impact that the 2007 recession had on the Buffalo Niagara region. That has helped us narrow the gap between incomes here and the rest of the country. A decade ago, per capita personal income here was 13 percent less than the national average. By the end of last year, our per capita personal income was just 5 percent less than the national average of $46,049.
The data also show how the local economy has changed since the recession.
While our manufacturing sector has finally bottomed out and begun a slow rebound, it’s still a shadow of what it once was. Despite a 4.5 percent increase in factory earnings last year, the amount of income generated from manufacturing has dropped by 6 percent since 2007, a reflection of the decline in factory jobs. Nationally, manufacturing income is up 3 percent since 2007.
But the building boom is making construction work a much bigger part of the local economy. Construction income jumped by almost 9 percent last year, matching the nationwide increase, and is 20 percent higher than it was before the recession. Nationally, construction income is down by 5 percent since 2007, mainly because the recession hit super-heated markets especially hard.
The finance and insurance sector is a mixed bag. Its overall earnings were up almost 4 percent last year, which isn’t surprising given the growth at GEICO’s customer service center in Amherst and Citigroup’s back office operations.
Yet each of those jobs are packing a smaller punch. A decade ago, the earnings from finance and insurance jobs here were about 20 percent higher than the average job. Now, they’re 4 percent lower, a reflection of the loss of HSBC Bank USA white-collar jobs and the shift toward more back-office work.
With the job market further strengthening this year, it could bode well for further income growth this year, although early indications are that wage pressures remain muted.
“It’s encouraging we’re on the path we’re on,” Keith said.