The wage gap: Where does your city stand?

National averages mask big regional differences

Worker jobs
Scott Eells | Bloomberg | Getty Images

Despite the strong pace of hiring in April, the average wage barely budged.

But that average masked a wide range of wage gains and losses from one part of the country to another.

A CNBC analysis of the latest local area wage data finds that in the past 12 months, average weekly pay has risen as much as 13.3 percent in Blacksburg, Virginia, and fallen by 12.2 percent in College Station, Texas.

The overall weak pace of job growth in April has some economists scratching their heads—wondering why a strong pickup in the pace of hiring hasn't translated into rising wages in workers' paychecks.

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"Given the encouraging mix of net jobs created, it was a bit disconcerting to see that average hourly earnings increased by only one tenth percent (monthly increase) in April," wrote Capital Economics' chief U.S. economist, Paul Ashworth, in a research note. That puts annual weekly wage growth at just 2.2. percent

But Ashworth notes that another widely watched measure of wages, the quarterly employment cost index, posted a healthier 2.7 percent gain over the past year.

"The stagnation in average hourly earnings growth is beginning to look very suspicious," he said.

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The strong pace of hiring—nearly 3 million new jobs were created last year, the biggest annual gain in 15 years—has made it harder for some companies to find qualified applicants. Around 5.1 million job openings remained unfilled at the end of February, the latest data available, the highest level since January 2001.

Tight labor markets are supposed to push wages higher, as employers compete for scarce skilled workers. Business surveys of both small enterprises and large corporations have recently found that hiring managers are having a tougher time filling positions and expect to raise wages this year to attract or keep workers.

Wages have been rising, but only in some metro areas around the country. In the 12 months ended in March, the average weekly wage was flat or lower in 185 of the 370 metro areas tracked by the Bureau of Labor Statistics.

Among the biggest metro gainers in percentage terms were Lansing, Michigan (up 7.1 percent), Hot Springs, Arkansas (up 7.0 percent), Bloomington, Indiana. (up 6.2 percent), Walla Walla, Washington (up 5.7 percent), Las Cruces, New Mexico (5.6 percent), Durham-Chapel Hill, North Carolina (5.5 percent) and Charleston, West Virginia (5.2 percent).

The collapse in oil prices has hit a number of metro areas in energy-producing regions. Metro area wage losses were biggest in College Station, Texas (down 12.2 percent), Billings, Montana (down 8.3 percent), Morgantown, West Virginia. (down 6.8 percent), Waco, Texas. (down 6.7 percent), Beloit, Wisconsin (down 5.7 percent), Beaumont, Texas (down 5.4 percent) and Pueblo, Colorado (down 5.0 percent).

Statewide, South Carolina has seen the biggest annual boost in wages, up 2.2 percent. Other strong gainers were Alaska, West Virginia, Rhode Island, New Hampshire and Kentucky.

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Montana saw the biggest wage drop statewide (down 1.2 percent). Among the top states for weekly wage losses were Texas, Illinois, Wyoming and Idaho.

Like the underlying forces driving economic growth, there are multiple causes for local wage disparities. Areas home to strong growth in high-wage industries like information services can expect that growth to show up in the monthly wage data. On the other hand, some metro areas reliant on manufacturing industries may be feeling the impact of the strong dollar, which has dampened the appeal of some U.S. export in overseas. The April jobs report showed overall losses in machinery and aircraft manufacturing, two major sources of U.S. exports.

Over time, local differences in wages gains tend to get smoothed out, as the prospect of a bigger paycheck attracts more workers, according to Andrew Chamberlain, chief economist at Glassdoor, a jobs website.

"People do pick up and go and where wages are growing fastest," he said. "If there are persistent differences in earnings between areas, the only thing that's stopping that is limited mobility."

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It remains to be seen whether a further pickup in the pace of hiring will begin to push wages higher. In past economic recoveries, wages typically began rising once the job market had reached "full employment" and workers had a better chance holding out for a raise.

But it's far from clear whether the job market is close to that point yet, a determination that's the subject of debate among Federal Reserve policymakers trying to decide if the economy is strong enough to begin raising interest rates.

Economy more like Goldilocks' grandmother : Pro
Economy more like Goldilocks' grandmother : Pro   

Some economists think the deep job losses from the recession—and fundamental demographic shifts since past economic recoveries—may have changed the job market's wage dynamics.

The slower pace of retirement by baby boomers, who are working later in life than previous generations, for example, means the current strong pace of hiring may not be enough to reach full employment as quickly as in past recoveries, according to Bill Spriggs, chief economist at the AFL-CIO.

"You need to generate even more new jobs to absorb new entrants to the labor market because the older ones aren't leaving," he said.