Are North Carolina’s wages growing like the nation’s?

Monday, January 7, 2019
Steven Pennington

According to the Bureau of Labor Statistics’ Employment Cost Index, U.S. workers recently experienced the largest year-over-year nominal wage increase in a decade. Unadjusted for inflation, wages rose 2.9% from September 2017 to September 2018.

With the national unemployment rate at the lowest level since 1969 and record numbers of job openings, wage growth shouldn’t come as a surprise. Nevertheless, news of increasing paychecks comes as welcome news considering their persistently slow growth.

We wanted to investigate how North Carolina’s wage growth rates compare to the nation utilizing CES data.  North Carolina’s labor market is now tighter than it was in 2007, prior to the recession, so it stands to reason that our wage growth would pick up steam as employers compete for relatively sparse unemployed workers.

For some perspective, it’s important to understand that North Carolina’s wages are generally lower than those of the nation. In October 2018, North Carolina’s private sector average wage was 93% of the comparable U.S. wage. Our state’s average wage for goods-producing jobs was 82% of the nation’s and our wage for private service-providing jobs was 95% of the nation. And these figures have been fairly stable over the last decade.

Nevertheless, North Carolina’s total private sector year-over year wage growth rates have exceeded those of the nation nearly every month since June 2015 – the exceptions being July and September of 2018 when they were approximately tied. However, the state lagged the nation’s wage growth from the beginning of 2013 through the middle of 2015.

We also want to consider where these wage increases have occurred in the economy. In North Carolina, about 82% of private sector jobs are in the service sector – the remaining 18% are considered part of the goods-producing sector, which includes manufacturing and construction. This proportion of service jobs to goods-producing jobs looks pretty similar at the national level. As a result, labor market performance in the service sector tends to have big impacts on the overall economy.

And, indeed, during times of North Carolina’s strongest recent wage growth relative to the nation (from the beginning of 2016 to the beginning of 2017), that growth was driven largely by service sector jobs.

But by mid-2017, the situation was very different with wage increases happening almost solely among goods-producing jobs. And during that time, from April 2017 to May 2018, North Carolina’s goods-producing sector grew 2.4% year-over-year on average, while the nation’s goods-producing sector grew only 0.2% year-over-year on average.

The goods-producing sector receives a lot of attention in the media and from policy makers because these are considered good jobs for a variety of reasons, including their relatively high average wages. But while the goods-producing sector pays higher average wages at the national level, that’s not the case in North Carolina where average hourly wages are higher among service sector jobs.

In part, this is because a relatively large portion of North Carolina’s good-producing labor market is made up of lower-paying production jobs. Since 2013, about 52% of North Carolina’s goods-producing jobs have been manufacturing production jobs, while about 44% of the nation’s goods-producing jobs have been in manufacturing production.

Nevertheless, recent wage increases in goods-producing sector have been a welcome development for North Carolina workers. Unfortunately, the state’s recent trend toward relatively high wage growth hasn’t been true for our production workers. Since 2013, wage growth among production workers in manufacturing establishments has much more closely mirrored production worker wage growth for the nation.

While recent wage growth has been beneficial for many North Carolinians, there are certainly some, particularly production workers, whose wages haven’t grown much in our state or the rest of the nation. In future articles, we plan to further investigate wage growth in the manufacturing sector, including among production workers whose wages remain well-below their national 1979 peak.