Wages Up, Unemployment Down But Pay Still Lagging

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Could the tight labor market, where every Indiana county experienced a lower unemployment rate in 2017 compared to 2016, actually be driving up wages? New private-sector wage data indicate such might be happening. Plus last year's growth at the state level exceeded inflation, creating more buying power with the dollars Hoosiers earned.

Anecdotal information last year about wage growth aligns with Quarterly Census of Employment and Wages data released by the U.S. Bureau of Labor Statistics in June. 2017’s average wages in 89 counties increased, with many counties exceeding the national or state growth rate.

Indiana’s average wage increased 3.74 percent from 2016 to 2017, going from $44,750 to $46,422. In contrast, the national average wage went from $53,515 to $55,331, an increase of almost 3.4 percent.

For Indiana’s metropolitan statistical areas, all had wage growth ahead of 2017’s 2 percent inflation. Elkhart-Goshen led the pack in wage growth at 7.61 percent, followed by Muncie and Terre Haute at 4.66 and 3.99 percent respectively. The Indianapolis-Carmel-Anderson MSA was just under the state rate at 3.71 percent, followed by Fort Wayne at 3.5 percent. Lafayette-West Lafayette MSA had the smallest growth of MSAs wholly within Indiana at 2.29 percent.

On the county level, 52 counties had percentage wage growth ahead of the national rate. Ohio County topped the list at 21.76 percent. Landing in second and third place were Pike and LaGrange counties at almost 12.75 and 9.74 percent respectively.

Looking statewide, only three counties had wages fall from 2016 to 2017: Brown, Grant and Randolph.

Enthusiasm over wage growth from should be tempered by the wages themselves. Average private-sector Hoosier wages were almost 84 cents for every dollar earned nationally.

Plus Ohio County’s eye-popping wage increase only brought the average to just above $30,000. Eighty Indiana counties still had average wages in the private sector below the state’s average. Just three Hoosier counties – Posey, Pike and Marion – had average wages above the U.S. average.

Looking at MSAs wholly within Indiana, Columbus, Indianapolis-Carmel-Anderson, Elkhart-Goshen and Kokomo were above the state average wage but all were below the national average threshold.

Under these measures, wages are attributed to the employer’s county of location. Income and labor market statistics are credited to the person’s county of residence.

Thus someone earning a $125,000 a year working in downtown Indianapolis but living in Carmel will have her pay added to the Marion County wage pool but credited toward Hamilton County’s personal income. Accordingly if a Portland resident is temporarily laid off from his job in Delaware County, he will be in the Jay County unemployment statistics.

Unemployment down but also total number of workers

Just as it has been since 2015, most anyone who wants a job in Indiana can find one, assuming unemployment below 5 percent counts as full employment due to the natural churn of employees.

Consistent with the strong labor market, the number of employed individuals went up between 2016 and 2017 for the state, according to Indiana Department of Workforce Development data. An additional 23,247 Hoosiers were working last year compared to 2016.

Every county in Indiana saw both the number of unemployed and the percent unemployed go down from 2016 to 2017. Indiana’s unemployment rate dropped nearly a full percent from 4.4 percent to 3.5 percent while the national rate went down just a half a percent: 4.9 to 4.4. However Indiana was still a full half percent ahead of the state’s record low of 1999’s 3 percent.

The booming recreational vehicle industry is reflected in counties with the lowest unemployment. Elkhart had the lowest rate statewide at 2.5 percent. Adams and LaGrange counties were right behind it at 2.6 percent. Dubois County also matched Adams and LaGrange.

The counties with the highest unemployment rate – 5 percent or higher – were not geographically proximate. They were Vermilion, Lake and Fayette at 5.4, 5.1 and 5 percent respectively. Just six Indiana counties had unemployment rates above the 2017 national average, but 44 had unemployment rates above the state average.

The Elkhart-Goshen MSA, which is only Elkhart County and thus matches the county’s rate, has the lowest MSA unemployment. The Gary division of the Chicago MSA had the highest MSA unemployment for Indiana at 4.8 percent.

Some of the unemployment decline may be attributed to people leaving the labor force rather than finding employment. Between 2016 and 2017, the state’s labor market – those working and the unemployed actively seeking employment – declined by about 6,700 people.

Some may be leaving employment willingly and voluntarily through retirement, returning to school full-time or to care for a family member, especially with Baby Boomers reaching ages 65, 70 and beyond. Others may have left employment as the result of a layoff at some point but stopped looking when they discovered available wages didn’t match what they were making in previous jobs. The misuse of opioids or other substances may also be causing some not to engage in the labor market.

By the numbers:

92: Counties with lower number of unemployed residents from 2016 to 2017

92: Counties with lower percentage of unemployed residents from 2016 to 2017

6: Counties with 2017 average unemployment above the national rate

44: Counties with 2017 average unemployment above the state rate

3: Counties with average private-sector wage above national average

12: Counties with average private-sector wage above state average

0: Indiana MSAs with average private-sector wage above national average

4: Indiana MSAs with average private-sector wage above state average

3: Counties with private-sector wages that declined from 2016 to 2017

Rachel Blakeman is the director of the Community Research Institute at Purdue University Fort Wayne.

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