Wages and hours across Southern California illustrate labor market weakness

We need to look at more than just job growth

As mentioned last week, while the region’s job numbers continue to impress, the same cannot be said for area wages and hours. In October, the average wage in the IE was $29.19, up 2.4% from October 2021. Wages in Los Angeles and San Diego are much higher, and the gap with IE wages has been growing over the last 2 years or so: at the start of 2021, IE wages were about 18.2% lower; the gap reached a high of 23.2% in June of this year and is still at 21.4% in the latest figures. In other words, wages in other parts of Southern California are growing faster. Refer to the chart below.

Hours tell a similar story. When labor markets are considered “healthy” for workers, we tend to see hours go up as there is more demand for workers’ time. Thus, the chart below is consistent with the fact that the demand for labor has been strongest out here in the IE – hours for the area’s workers are higher than both Los Angeles and San Diego; 35.5 in the most recent figures. However, note the decline in this series since its “peak” in mid-2021. This drop has been most pronounced in the IE and San Diego and has so far eluded Los Angeles. Thus, hours are actually off by 0.4 hour compared to last year at this time.

Some simple math (multiply “earnings/hour” by “hours/week”) will tell you that weekly pay for IE workers has stagnated and is certainly not keeping up with the rising cost of living. While sectoral composition (for example, toward lower-paying sectors) might be playing some role in this, as Jonathan Lansner has recently suggested, that certainly doesn’t seem to be the entire story here.