Special Report

10 Cities Where Wages Are Soaring

463785967Although there are many signs the economy is improving, average weekly wages in the United States remained stagnant throughout 2013. This was a notable change from a year earlier, when weekly wages rose 4.7% over the same period.

Despite flattening nationally, wages posted strong growth in some metro areas. In six of the 10 metro areas, wages grew at least 6%. In Idaho Falls, wages grew by 18.4% between the fourth quarters of 2012 and 2013. Based on data from the Bureau of Labor Statistics (BLS), these are the metro areas where wages are soaring.

Click here to see the 10 cities where wages are soaring

A strong construction sector drove wages up in half of the metro areas with the largest pay increases. Construction wages increased by 32% in the Santa Cruz metro area over this period, well above the 1.6% growth in construction wages nationally. Martin Kohli, chief regional economist for the BLS, explained that construction wage growth was particularly strong among specialty trade contractors — those who are responsible for specific aspects of a construction project rather than overseeing the whole process.

Manufacturing also appears to have contributed to wage growth. Nationally, industry wages were up 1.3%. Manufacturing wage gains in the Santa Cruz, Idaho Falls and Boise City metro areas supported overall wage growth in those areas.

However, not all sectors had positive wage growth over this period. Most notably, wages in the financial services sector shrank by 2.6%, largely due to a contraction in the securities industry. Most of the national decline in financial sector wages can be explained by firms reshuffling bonuses such that large bonuses showed up at the end of 2012 and, by contrast, were relatively modest in 2013, according to Kohli. In most of the metro areas where wages are declining, however, financial services make up a large part of the economy, perhaps bringing down wages. Metro areas with rising wages, on the other hand, did not have large financial sectors.

Another explanation for the strong wage growth in these areas may be the low initial wages. In every metro area but Houma, average weekly wages were well below the national average. “It could be easier to see big wage increases in low wage areas if you have job growth in construction or some higher wage sector,” Kohli said.

In half of the metro areas with the largest wage increases, unemployment rates were well below the national rate. Low unemployment is likely another driver of strong wage growth as the higher demand for employees can leave workers at a better position when negotiating wages.

However, unemployment figures may not be a good predictor of wage growth. “You can have [large] wage increases even though you have high unemployment in an area, because you’re paying employees that would be really hard to replace,” Kohli said.

Based on the BLS Quarterly Census of Employment and Wages, 24/7 Wall St. reviewed the 10 metropolitan areas with the biggest increases in average weekly wages between the fourth quarter of 2012 and the fourth quarter of 2013. We also considered changes in employment by sector and unemployment rates, both from the BLS and as of 2013.

These are the American metro areas where wages are soaring.

10. Santa Fe, N.M.
> 1-yr. wage growth: 5.3%
> Average weekly wage: $947
> 1-yr. unemployment rate change: -0.2%
> 1-yr. employment rate change: 3.9%

Santa Fe’s unemployment rate has declined in recent years, from 5.4% in 2012 to 5.2% in 2013, remaining well below the national average. At the same time, income has increased. Between the fourth quarter of 2012 and the same period in 2013, average wages rose by 5.3%. Wage growth was likely due to the state’s active role in promoting and attracting jobs that expanded employment opportunities. The state legislature approved $7.9 million to fund the Job Training Incentive Program to entice employers to hire and train new workers in 2012. This was an increase of $6.7 million from the previous year. Santa Fe’s strong economic performance has likely benefitted from the state’s strong export growth. New Mexico’s export growth improved from 38th in the nation in 2011 to first in 2013, likely due to lowering business taxes that attracted companies such as Union Pacific, TE Connectivity, Honeywell’s Bendix/King and Lowe’s Customer Contact Center to the state.

9. Muskegon, Mich.
> 1-yr. wage growth: 5.4%
> Average weekly wage: $816
> 1-yr. unemployment rate change: 0.0%
> 1-yr. employment rate change: 0.9%

Wages in Muskegon grew by 5.4% in the 12 months prior to the fourth quarter of 2013. Over this time, the unemployment rate remained flat between May 2012 and May 2013 at 9.1%, while the national rate fell from 8.2% to 7.3%. Promisingly, the unemployment rate hit 7% in May of this year. The Muskegon metro area had the third fastest job growth in the state. This has likely contributed to the declining unemployment and strong wage growth. Much of this job growth was in the leisure and hospitality sector, which expanded payrolls by 12.5% in 2013. The more than 25 new businesses that opened in the Muskegon metro area may be a further sign of strong economic, wage and employment growth in the area.

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8. Myrtle Beach-Conway-North Myrtle Beach, S.C.-N.C.
> 1-yr. wage growth: 5.9%
> Average weekly wage: $613
> 1-yr. unemployment rate change: 1.9%
> 1-yr. employment rate change: 28.3%

Wages in Horry County, which was previously the only county in the Myrtle Beach metro area, declined for the year. However, the addition of Brunswick County, N.C., to the metro area likely explains much of the wage growth in the region. In both Horry and Brunswick counties, construction wages rose 6.1% and 18.5%, respectively, which likely contributed to rising wages. Despite strong job growth of 5.9% between the fourth quarters of 2012 and 2013, the Myrtle Beach metro area had the second lowest average annual salary of any metro area in the country. Low weekly wages may provide more of an opportunity for high wage growth, Kohli indicated. Between 2012 and 2013, employment opportunities in Myrtle Beach increased 28%. Even if the new jobs didn’t pay the highest wages, the expansion of employment opportunities may still have supported overall wage growth.

7. Boise City, Idaho
> 1-yr. wage growth: 5.9%
> Average weekly wage: $839
> 1-yr. unemployment rate change: -0.2%
> 1-yr. employment rate change: 3.3%

Boise City’s unemployment rate was nearly two percentage points lower than the national rate from 2012 to 2014. Despite strong employment numbers, the Boise City metro area had an average salary of $40,372 in 2013, more than $9,000 below the national average. However, the nearly 6% growth in weekly wages between the final quarters of 2012 and 2013 suggests that salaries may soon be on par with national levels. The strong wage growth was likely, in part, due to a rebound in construction in the area — the number of building permits local governments issued increased by 87% in 2013. Additionally, strong employment gains in information services and health care industries offset the losses in other, more technology-related sectors.

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6. Houma-Thibodaux, La.
> 1-yr. wage growth: 6.1%
> Average weekly wage: $1,071
> 1yr. unemployment rate change: -0.2%
> 1-yr. employment rate change: 4.2%

Average wages rose consistently in the Houma metro area during 2013. In every quarter that year, wages were up between 6% and 8% compared to the year before. Overall, the average annual wage rose from $48,887 per worker in 2012 to $52,173 in 2013. One reason for the upward push in wages may be the abundance of jobs in the area. Just 3.7% of the Houma area workforce was unemployed in May, among the lowest rates in the nation and down from 4.5% a year before. The offshore oil industry plays a major role in the area’s economy and is among the leading sources of the area’s governmental revenue, according to the Terrebonne Parish Consolidated Government.

5. Santa Cruz- Watsonville, Calif.
> 1-yr. wage growth: 6.7%
> Average weekly wage: $907
> 1-yr. unemployment rate change: -0.7%
> 1-yr. employment rate change: 3.6%

The Santa Cruz metro area’s gross domestic product expanded by 1.8% in 2012, much of which was driven by manufacturing. Nationally, manufacturing wages increased by 1.3% between 2012 and 2013. In Santa Cruz, average manufacturing wages increased by 32% during that time, which may explain the 6.7% increase in area wages between the fourth quarter of 2012 and the fourth quarter of 2013. The tourism industry has routinely been one of the top two sectors in this metro area, with direct annual travel expenditures above $500 million, and may also explain the rapid increase in wages.

4. Wheeling, W.Va.-Ohio
> 1-yr. wage growth: 8.7%
> Average weekly wage: $802
> 1-yr. unemployment rate change: -0.9%
> 1-yr. employment rate change: 0.8%

Wages in Wheeling not only grew in 2013, but also grew faster as the year went along. In the first quarter of last year, wages were up 4.2% compared to the first quarter the year before. By the fourth quarter of last year, that figure had risen to 8.7%. Wages grew despite the fact that unemployment in the area remained elevated. The area’s unemployment rate was 6.2% in May, effectively unchanged from the 6.6% rate 12 months earlier. By comparison, in that same time frame, the national unemployment rate fell by 1.2 percentage points, from 7.3% to 6.1%. Nonfarm jobs in the area were also little changed, growing from 66,900 in 2012 to 67,600 in 2013. Despite very low job growth, construction — particularly among specialty contractors — may have been the force driving high wage growth.

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3. Gulfport-Biloxi-Pascagoula, Miss.
> 1-yr. wage growth: 10.6%
> Average weekly wage: $791
> 1-yr. unemployment rate change: 0.1%
> 1-yr. employment rate change: 45.6%

On top of the Great Recession, the Gulfport metro area was also severely hurt by Hurricane Katrina and the Deepwater Horizon oil spill in the past decade. These events harmed the area’s leisure and hospitality sector, which has traditionally accounted for a sizable share of the area’s employment. In fact, in 2013, the sector accounted for 22% of all nonfarm jobs in Gulfport and Biloxi, more than in all but a small number of metro areas. Pascagoula, in turn, was exceptionally manufacturing-heavy, accounting for 24% of all nonfarm jobs in 2013. Many of the manufacturing jobs are in shipbuilding, led by Huntington Ingalls, which claims to be the largest manufacturing employer in Mississippi. Wages grew more than 10% in the fourth quarter of 2013 from the year before.

2. The Villages, Fla.
> 1-yr. wage growth: 11.8%
> Average weekly wage: $870
> 1-yr. unemployment rate change: N/A
> 1-yr. employment rate change: 7.6%

Wages in The Villages rose by 11.8% between the fourth quarters of 2012 and 2013, from $778 a week to $870 a week. Interestingly, wages grew by no more than 3% in any of the first three quarters of 2013. The Villages is not only the nation’s fastest-growing metro area by population, growing at roughly 513% between 2000 and 2010, but also it is the world’s largest retirement community, with 110,000 residents, half of whom are at least 68. Seasonal factors appear to play a major role in determining aggregate wages in the area. Area wages are typically far higher in the fourth quarter of the year, potentially because of retirees spending the winter months in The Villages and the area hosting bigger events while they are in town. In the first three quarters of 2013, average weekly wages were below $680. In the fourth quarter, however, the average wage was $870 per week.

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1. Idaho Falls, Idaho
> 1-yr. wage growth: 18.4%
> Average weekly wage: $806
> 1-yr. unemployment rate change: -0.6%
> 1-yr. employment rate change: N/A

Wages in Idaho Falls rose by 18.4% between the fourth quarters of 2012 and 2013, by far the most of any metro area in the nation. Wages grew at a similar rate in every quarter last year, amounting to an annual wage growth of 20% compared to 2012, also by far the most in the nation. Likely helping to boost wages in Idaho Falls is the area’s substantial drop in unemployment. The Idaho Falls unemployment rate fell from an already-low 5.2% in May of 2013 to just 3.7% this May, lower than in the vast majority of U.S. metro areas. In two of the three counties in this metro area, professional and business services accounted for much of the wage growth overall.

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