There’s finally good news for folks in the Buffalo Niagara region when payday comes around.
Our incomes grew last year at the second-highest rate since the Great Recession, according to new federal data.
And for that, you can thank the tightening job market, which is finally starting to put upward pressure on wages as employers face stiffer competition to find new workers and keep the ones they have from moving on to a better-paying job elsewhere.
"We're seeing that labor markets are tightening throughout the region," said Jaison Abel, a Federal Reserve Bank of New York economist. "Wage growth has picked up."
Even so, it’s not a big change in a long economic recovery that largely has not translated into significantly better pay for workers.
Our incomes – not just wages and salaries, but also dividends, rental income and social services payments – grew by 2.4 percent last year, after adjusting for inflation, according to the latest personal income data from the U.S. Bureau of Economic Analysis. That’s second only to the 3.5 percent increase in 2015 since the Great Recession began a decade ago.
So the increase last year was a bright spot, but in the long run, the more than eight-year-old economic recovery still hasn’t made a big difference in our incomes. Since 2008, our incomes have grown by only 11 percent, after inflation. That works out to be about 1 percent a year.
Here are the specifics:
- Personal income in Buffalo Niagara, on a per capita basis, was up 2.4 percent in 2017 after adjusting for inflation. That was the second-biggest increase since 2008, trailing only the 3.5 percent rise in 2015. Real incomes were essentially flat in 2016. Unfortunately, last year was more of the exception than the rule. Since the recession ended, our income growth has been tepid, averaging just 1.6 percent a year since 2009.
- In real numbers, our incomes grew by about $1,150 last year, after adjusting for inflation to $48,314. That's about 6 percent less than the nationwide income of $51,640 per person.
- On a more encouraging note, our personal incomes in the Buffalo Niagara region grew a little faster than the national average, where per capita incomes rose by 1.5 percent during 2017 after adjusting for inflation. It was the sixth time in the last nine 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 154th.
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.
"The bottom line is there's more money floating around our economy," said Gary Keith, the regional economist at M&T Bank. "If there are more dollars in your economy, you spend more and you grow more."
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.
One red flag Keith saw in the 2017 income data was the steep 8 percent rise in transfer payments, which includes Social Security and social assistance payments. That was more than double the nationwide increase. While the aging local population could account for some of the increase in transfer payments, Keith said it would be even more bullish for the local economy if a greater share of the increase came from job-related earnings.
And to some extent, it did. Despite the continued tight job market, our wages and salaries grew faster last year, rising by 2.8 percent, after a lackluster 1.9 percent gain in 2016.
That uptick is encouraging because it indicates that wage growth is back on the more accelerated track that it had been on during 2014 and 2015, when the increases topped 3 percent a year.
"If earnings have gone up, and income has gone up, those are a double indication that things are getting better," said George Palumbo, a Canisius College economist.
A modest uptick in hiring, a shrinking local labor force as baby boomers retire and the region’s stagnant overall population continued to intensify wage pressure last year, especially now that unemployment is down to a more than 28-year low of 3.6 percent and the pool of unemployed workers is smaller than it's been since at least 1990.
But that doesn't mean everyone is sharing equally within the local job market.
The Buffalo Niagara housing market is hotter than it’s been in decades, and that translated into a 2.7 percent jump in inflation-adjusted wages and salary for workers in the real estate sector. Wages grew by 2.2 percent in the expanding banking and financial services sector. The surge in new restaurant and hotel openings – combined with a rising minimum wage – contributed to a 2.2 percent rise in income per job within the leisure and hospitality sector. Wages in the category that includes temporary help agencies grew by 4.8 percent after inflation.
Yet the average income per job within the education services sector fell by nearly 5 percent during 2017. It was down by 1.5 percent in the transportation and utility sector.
Worker turnover can have a big impact on wage trends. A sector with an older workforce can see downward pressure on overall wages as workers retire at the top of their pay scale and are replaced by younger employees who earn lower starting wages.
A report last week from the U.S. Bureau of Labor Statistics provided further evidence that earnings growth is on the upswing across the Buffalo Niagara region.
That report showed average weekly wages grew at a 4.6 percent annualized rate during the second quarter after growing by a 3.5 percent pace in the first quarter and by just 2.7 percent during all of 2017.
Weekly wages nationwide – which are influenced by hourly pay and hours worked – grew by 3.4 percent in the second quarter after rising by 3.7 percent in the first three months of this year. That puts local wage growth during the first half of the year slightly ahead of the national increase.