We’re finally starting to see the payoff in our paychecks from the tightening Buffalo Niagara job market.
And it’s a pretty significant payoff, too.
Our personal incomes grew by 4.1 percent last year, after adjusting for inflation, the federal government reported recently.
It was the biggest increase in inflation-adjusted incomes, on a per capita basis, in 32 years, dating all the way back to 1984.
“It’s the wages,” said Gary Keith, M&T Bank’s regional economist in Buffalo. “More people are working. More people are earning money.”
Even more impressive, it was better than the 3.6 percent increase nationwide and it continued a 10-year stretch where income growth in the Buffalo Niagara region has actually been stronger than it has across the rest of the country.
Here’s why that’s important: Spending by consumers makes up about 70 percent of all domestic economic activity. The more local consumers have to spend, the more robust the Buffalo Niagara economy will be. And how much they have to spend depends, in large part, on how fast their incomes are growing.
So rising incomes mean more purchases at the mall, maybe an extra trip to the movies or a fast-food place. For the truly fastidious among us, it even could mean a little bigger cushion in our savings account.
But it doesn’t mean we’re on Easy Street. The increase in incomes amounts to a little less than $35 a week for every man, woman and child living in Erie and Niagara counties.
Here’s a closer look at how our incomes are changing.
Where income comes from
As the Buffalo Niagara population ages, earnings are a smaller source of our overall income. Instead, the strengthening local housing market is pushing up rental income, while dividend payments also are up.
We get 63 percent of our overall income from job-related compensation, just under the national average. Our income from dividends, interest and rent also has increased, but it’s still a smaller piece of the overall income pie than it is nationally. We get an outsized portion of our income from transfer payments, which include Social Security and public benefits, partly due to our growing pool of retired workers and rising medical benefit payments.
Where the wages are
Many people still think of Buffalo as a manufacturing town. It isn’t. It’s a government town.
Government accounts for nearly $1 of every $4 of job-related earnings in the Buffalo Niagara region. Manufacturing is third, providing a little less than $1 of every $7 in employment earnings. But local factories, which accounted for $1 of every $6 in net earnings just a decade ago, now generate slightly less in job-related compensation than the expanding health care and social assistance industry, and it’s barely ahead of the trade sector.
Don’t count factories out
Despite decades of decline, the Buffalo Niagara region’s manufacturers actually have enjoyed a bit of a rebound over the past two years.
Incomes from manufacturing rose by a little less than 4 percent last year and grew by 5.2 percent in 2014 as employment began to stabilize – and even increase a bit – in a welcome reversal from the steady wave of plant closings and cutbacks.
The total income generated from manufacturing last year was the most since 2008, after adjusting for inflation.
The cranes are real
There really is meat behind all the talk about a building boom in the Buffalo Niagara region.
Construction income has never generated a huge amount of local earnings. But with high-profile construction projects at places like Riverbend and the Buffalo Niagara Medical Campus, construction incomes have been growing faster than the earnings from any other local industry over the past two years, rising by more than 6 percent during each of the past two years.
That left construction income in 2015 at its highest level since at least 2001, even after adjusting for inflation.
Trade is growing
With the economy chugging along, trade has been a growing source of income over the past two years, with increases of more than 5 percent in both 2014 and 2015.
On the retail side, there’s been strong income growth from car and auto parts dealers, along with building supply stores and dealers.
On the wholesale side, which includes the region’s warehouses and distribution facilities, income growth has been just as strong, capitalizing on economic development efforts to capitalize on the region’s central location to key East Coast and Midwest population centers, as well as Canada.
Wages and salaries grow
For most of the recovery, wage growth has been stubbornly slow. But that has started to change over the last two years as the local job market has tightened, with unemployment dropping to around 5 percent.
The average wages and salaries earned per job grew by 3.2 percent last year to $45,630, which was a little better than the 3.1 percent increase in 2014 and the biggest gain since 2007.
And with unemployment still low and hiring growing modestly, Keith think that will keep upward pressure on wages.
“I’m sure it’s carried into 2016,” he said.
Dividends and rent are rising
Buffalo Niagara residents are getting more of their income from dividends and rent. Per capita income from dividends, interest and rent grew by 3.8 percent last year and is up by nearly 12 percent over the previous two years.
With the stock market continuing its rally, dividend payments have been increasing to investors. As local housing prices rise, rents are increasing as well. That’s pushing up rental income for apartment owners.
Transfer payments increase
Transfer payments – which range from Social Security to Medicare and human assistance programs – also make up a bigger part of the overall income pie.
And the changes aren’t entirely bad. With the economy growing, income maintenance benefit payments rose by less than 1 percent last year, while unemployment insurance payments have dropped for
five straight years to a post-recession low.
The growth in transfer payments is coming from rising retirement-related income – think Social Security – which grew by 5 percent last year, not surprising given our aging population.