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Southern California pay hikes slow to 3% a year, as inflation eats at gains

Despite all the talk about a regional labor shortage, Southern California pay raises remain stubbornly modest.

Wages in the region rose at a 3 percent annual rate in the 12 months ended in September — down from 3.2 percent a year earlier, according to one federal yardstick. The Employment Cost Index tracks employee pay without the distortions created by varying hiring and salary patterns in specific industries.

By ECI’s math, salary increases in Los Angeles, Orange, Riverside, San Bernardino and Ventura counties were just behind the national pace. U.S. pay in September was rising at a 3.1 percent annual rate vs. 2.6 percent a year earlier.

These modest gains for local paychecks are a bit of a head-scratcher. There were promises made that a federal corporate tax cut would be well-shared with the rank and file. And for those who did get a raise, growing inflation has dulled its buying power.

Of course, you could focus on the silver lining. Of the 15 regions tracked across the U.S. in the most recent quarter, Southern California pay raises ranked No. 7. The top region was Miami at 3.9 percent.

To be fair to local bosses, they don’t look so stingy when viewed through a longer lens, relatively speaking. A year ago, local pay increases ranked fourth highest among the 15 regions. And since 2014, Southern California pay increases have averaged 2.88 percent vs. 2.84 percent in Western states and 2.42 percent nationally.

The report also tracks total compensation — that’s changes in pay plus benefit costs. The calculation doesn’t make the picture brighter. For Southern California, total compensation rose 2.4 percent in a year in the most recent period vs. 3.6 percent a year earlier. Nationally, compensation rose 2.9 percent vs. 2.5 percent a year earlier.

Other federal pay measures suggest a mixed picture.

Average weekly earnings, taken from polling of employers, showed workers in Los Angeles and Orange counties averaged 4.8 percent more a year in the third quarter vs. 3.6 percent a year earlier. But in the Inland Empire, earnings rose 2.7 percent this summer vs. 4 percent in 2017’s third quarter.

And the tracking of pay from unemployment insurance files found Los Angeles County pay rising 4 percent a year, as of June. It was the only local county to top the nation’s 3.4 percent hikes. Riverside County pay rose 3.3 percent; Orange County, 2.7 percent; and San Bernardino County, up 2.3 percent.

No matter who is tabulating pay hikes, the buying power of these local raises is being blunted by rising inflation.

The local cost-of-living is increasing at the fastest pace in 10 years. Thanks to pricier housing and gasoline, the Consumer Price Index for Los Angeles and Orange counties was up at a 4.1 percent annual rate in October, tying May’s result for the highest local inflation rate since September 2008.

One has to wonder why such a tight job market is failing to motivate bosses to pay up to attract and retain talent.

Look at Southern California’s unemployment rate: 4.23 percent in October, which is running well the below the 6.76 percent average the previous five years. And the number of officially jobless workers in the region (375,800) is 35 percent below the 2013-2017 average.

Of course, no salary benchmark speaks to every worker’s situation. Yet a national wage yardstick from the Federal Reserve Bank of Atlanta hints at what’s dragging on household incomes and consumer psyche: the no-raise flock.

In October, the median U.S. wage growth was 3.7 percent — noteworthy news as the best result since December 2008. But 13.9 percent of all jobs — loosely 20 million workers — showed no wage gains at all.

That’s fairly stunning when you consider the unemployment rate is sitting at lows not seen in decades. Ponder that the no-raise flock is a notch larger this year than the 21-year average: 13.3 percent of workers typically have flat wages.

And if you go back to December 2008, the last time the median U.S. pay gain was higher, only 11.7 percent of U.S. workers were not receiving fatter paychecks.

Is this raise gap a sign of an uneven economic expansion? Or is it stingier bosses?

Source: Orange County Register

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