Lawrence pay growth slows

Federal data: Wage, salary increase behind U.S., state averages in ’07

Area pay growth

Here’s a look at total wage and salary growth from 2006 to 2007 for selected areas. The numbers include wages for existing and new jobs — and shouldn’t be misconstrued as annual pay raises to individuals:

• Douglas County: 3.7 percent• Kansas City metro: 5.9 percent• Riley County: 7.1 percent• Topeka metro: 6.8 percent• Wichita metro: 5.8 percent• Kansas: 6.1 percent• Ames, Iowa: 6.1 percent• Columbia, Mo.: 4.6 percent• Iowa City: 7.1 percent

Source: Bureau of Economic Analysis

Lawrence got a head start on the economic slowdown.

At least that’s what new federal numbers on wage and salary growth suggest, as earnings for Lawrence workers in 2007 — when the national economy was still on relatively solid footing — grew at a significantly slower rate than state and national averages.

The numbers raise a major question for community leaders to ponder, some area economists say.

“The big question is why has Lawrence slowed down,” Donna Ginther, director of a center for economic and business research at Kansas University, said. “We have been used to pretty fast growth, relative to the rest of the state.”

The numbers suggest a possible reason: Lawrence’s once hot housing market slowed earlier than housing markets in many other parts of the country.

Here’s what the new numbers show: In 2007, the total amount of wages and salaries paid in Douglas County grew by 3.7 percent. The statewide average was 6.1 percent, and the national average was 5.5 percent.

If those numbers sound higher than the average raises for 2007, there’s a reason. Those numbers include wages for new jobs that didn’t exist in 2006. The average growth in wage per job was just 2.8 percent in Lawrence. That growth also was below state and national averages, which checked in at 3.4 percent for the state and 4.1 percent for the nation.

In Lawrence, no industry was hit harder than the construction industry. Wages paid to construction workers in Douglas County plunged by $16 million in 2007, or a decline of 14 percent. But the drop was in stark contrast to what was happening elsewhere. Statewide, construction wages grew by 6.1 percent in 2007. Nationally, they grew by 4.2 percent.

“One of the things is that gas prices perhaps made it less desirable to live in Lawrence,” Ginther said. “People maybe wanted to live closer to their jobs in Topeka or Kansas City.”

City Commissioner Rob Chestnut said another explanation is that Lawrence’s housing market got hotter earlier than other markets, and thus cooled off earlier as well. But Chestnut said the real issue is figuring out how to make the city less reliant on single-family housing construction.

“For a long time we’ve been relying on population growth and residential housing growth,” Chestnut said. “That will always be part of our economy, but we have to diversify.”

The new numbers bring up questions about how much the local economy has been set back in 2008. For example, in 2007 single-family building permits in Lawrence fell to their lowest level since 1985. But that didn’t turn out to be the bottom for the construction industry. Single-family building permit numbers in 2008 are on track to come in even lower.

“They will look ugly,” Chestnut said of 2008 numbers. “But the good news is that we still live in a community that has some insulation and stability in our employment because of the university.”

The new wage numbers showed that 35.9 percent of all wages and salaries in Douglas County came from the government sector in 2007. That was up from 35.1 percent in 2006.