Income tale takes turn for the worse
Oops. That’s essentially what the federal government said last week, as it took a fresh look at local personal incomes across the country.
In the Buffalo Niagara region, the new story is nowhere near as pleasant as the old version.
When last we heard from the experts at the Bureau of Economic Analysis in the spring, the story was pretty upbeat. Per capita personal incomes here were on a roll, growing faster than the national average for a second straight year in 2007 and rising at their strongest pace in almost 20 years.
That didn’t feel quite right at the time, given the region’s paltry job growth and the steady decline in the factory jobs that tend to pay better than most other positions locally. Our big source of income growth, as the original story went, was from transfer payments—things like Social Security, welfare and unemployment benefits—that come with a weak job market and an aging population.
As it turns out, the first draft of the story was way off base.
Instead of rising faster than the national average for four of the six years from 2001 to 2007, incomes here outpaced the rest of the country just twice during that period—and not once in the four years from 2004 to 2007.
Rather than per capita incomes shooting up by 5.5 percent in 2007 and a stellar 6.2 percent in 2006, the revised growth rates are a much more pedestrian 5.6 percent in 2006 and 4.2 percent to $35,038 in 2007. That’s less than the 4.9 percent growth nationally in 2007.
The big reason is our lackluster earnings growth, which isn’t coming close to keeping pace with the country as a whole. Earnings by people working in the Buffalo Niagara region grew a third slower than the national average in 2007, rising by just 3.2 percent, compared with a 4.9 percent increase nationally.
That’s a huge difference, one that has an enormous overall impact on local businesses since consumer spending makes up about 70 percent of all economic activity. If our earnings aren’t rising as fast as they are for people in other parts of the country, then the Buffalo Niagara region will struggle to keep up with the rest of the United States in job growth, business opportunities and even population.
“It never did make any sense,” says George Palumbo, a Canisius College economist who closely tracks the local personal income trends.
“The earnings per worker had fallen behind the national average somewhere between 1984 and 1990 and they continue to be below the national average,” he said. “Where else could the income have originated?”
All that sets the stage for what could be even more sobering changes in the income picture as the economy has weakened. Remember, the economy was still going strong in 2007, when the latest snapshot of local incomes was taken. The downturn locally didn’t really hit with full force until last fall, and it’s continued unabated since then.
We’ve lost 11,100 jobs over the last year alone, and nowhere has the pain been more intense than at the local auto plants, where pay tends to be far above average. With the local unemployment rate now at 9.2 percent—a level not seen since the mid-1980s—many workers who lost good-paying jobs are being forced to consider positions that pay much less—if they can find a company that’s hiring at all.
All that will cut further into our incomes, so much so that Palumbo worries that that the region could actually see income levels decline at some point in the future.
“I hope we don’t see it, but it may come,” he says.
And that story, if it comes to pass, couldn’t be called anything other than a horror story.
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