What's in your wallet?
For many of us, the answer to that question hasn't changed much throughout the economy's long and steady recovery from the Great Recession: Not much more.
New data from the federal government show that our incomes finally started growing at a faster pace during 2015, potentially signalling a breakout in earnings after just tepid gains during the first six years of the ongoing economic expansion.
Here are the details:
• Personal income, on a per capita basis, grew by 3.9 percent in 2015 after adjusting for inflation. That was the biggest increase for any year since the recession and more than double the 1.7 percent increase in 2014.
That was welcome news, since the recovery from the recession has been notable for its lack of wage growth, even as hiring has accelerated and unemployment has dropped below 5 percent.
• In real numbers, it meant our incomes grew by an average of $1,681 during 2015, to $44,725 after inflation. That works out to about $32 a week in added spending power.
• To show just how slowly our incomes had been growing, the 2015 increase was bigger than the rise in real personal incomes locally during the entire three-year period from 2012 to 2014.
• Even more encouraging, our personal incomes in the Buffalo Niagara region grew faster than the national average, where per capita incomes increased by 3.3 percent during 2015. The accelerated growth put the Buffalo Niagara region among the top third of the nation’s 382 biggest metro areas for income gains.
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 a fast-food place. For the truly frugal among us, it could even 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.
In 2015, our wages and salaries started to rebound with renewed strength as the local job market began to tighten. After adjusting for inflation, our annual wages per employee grew by a little more than 2.4 percent, far faster than the 1.4 percent rise in 2014. That reflects the modest uptick in hiring across the region and the steady drop in the local unemployment rate.
With the local labor force shrinking as Baby Boomers head into retirement and the region's overall population remaining stagnant, there are fewer unemployed people to fill available jobs, and local economists say many of those workers lack the skills that those openings require or the transportation to get to those jobs.
"One of the things I think we're starting to see is pressure for increased wages," said John Slenker, the state Labor Department's regional economist in Buffalo.
But the trend toward better pay isn't spread equally across occupations.
The strengthening housing market in the Buffalo Niagara region translated into a nearly 7 percent increase in compensation for workers in the real estate sector. The growth in the local banking and financial services sector fueled a better than 5 percent increase in compensation per job during 2015, before accounting for inflation.
But it was a different story for other workers. Total compensation – which includes employee benefits – barely matched the inflation rate for local manufacturing jobs. It was the same thing for other significant sectors of the local economy – from wholesale trade and professional services to transportation and warehousing. Each had a less than 3 percent increase in overall compensation per job, lagging behind the 3.2 percent average gain across the Buffalo Niagara region.
And then there's this potential dark cloud hovering over our wallets. Weekly wage data from the Census Bureau – a different source than the Bureau of Economic Analysis uses to compile the personal income data – indicates that wage growth slowed across the Buffalo Niagara region last year. The Census data show the average weekly wage in the Buffalo Niagara region grew by 1.9 percent last year, down sharply from the 3.1 percent increase in 2015 and the 3.2 percent jump in 2014.
"You would think, in a tightening market, that you'd see upward pressure on wages," said Gary Keith, M&T Bank's regional economist in Buffalo.
As it is, though, that upward pressure has only been coming in fits and starts. And that's hardly cause for workers to celebrate.