Latest / Wages and Prices with Fexingo: Cost of Living, Pay Raises, and Workers' Purchasing Power / Why Your Raise Depends on Where You Live
Transcript
- Lucas: Let's talk about where your raise actually lands. National average hourly earnings hit thirty-seven dollars and forty cents in April, up a bit from the month before. That sounds like steady progress. Luna: But steady for whom? Because I've been looking at a new working paper from the San Francisco Fed, and it breaks down wage growth by metro area. The gap is kind of wild. Lucas: That's exactly what caught my eye. The paper tracks real wage growth across the fifty largest metros. And the headline is pretty stark: workers in Sun Belt cities like Atlanta and Phoenix have seen their paychecks grow more than twice as fast, in real terms, as workers in New York or San Francisco over the past three years. Luna: So the national average is hiding a split. If you're in a high-cost coastal city, your raise might not feel like a raise at all. Lucas: Right. Let me give you a specific number. The Fed researchers found that real wage growth in low-cost metros averaged about three point two percent annually from 2023 through early 2026. In high-cost metros, it was barely one percent. That's a two-percentage-point gap every year. Luna: Compounded over three years, that's huge. And it explains why someone in Nashville feels pretty good about their paycheck while someone in Boston is still squeezed. Lucas: Exactly. Now, part of this is mechanical. Housing costs make up a bigger share of the CPI basket in expensive cities. So when rents surged nationally, the inflation rate for those metros was higher, eating more of the nominal wage gain. Luna: But there's also a labor supply story, right? A lot of people moved to the Sun Belt during and after the pandemic. That influx of workers should have suppressed wages, not boosted them. Lucas: You'd think so. But the data shows the opposite. Even with population growth, demand for labor in those metros has been stronger. Job openings in Atlanta and Dallas have stayed elevated. Employers there are competing for workers, bidding up wages faster than in New York, where job openings have been slower to recover. Luna: So it's not just about cost of living. It's about which local economies are actually booming right now. Lucas: Precisely. And the Fed paper makes an important point: the national wage numbers we all watch, they smooth over these regional dynamics. If you're a policymaker at the Fed, you could see average hourly earnings rising at a moderate pace and think, 'Okay, labor market is balanced.' But that masks the fact that some workers are getting a real raise and others are falling behind. Luna: That has implications for how the Fed sets interest rates, too. If they're looking at national averages, they might not see the pockets of overheating or weakness. Lucas: Exactly. And it matters for workers. If you're in a high-cost city and your employer is giving you a three percent raise, you might feel like you're treading water. But a worker in Phoenix getting the same three percent raise is actually gaining ground because their rent didn't go up as much. Luna: Now, the data I saw suggests that rent growth has started to cool in some of those expensive coastal markets. So the gap might narrow going forward. Lucas: That's the hope. The ten-year breakeven inflation rate has actually dipped a bit recently, to two point three eight percent. That suggests bond traders think inflation will moderate. But shelter costs are sticky. Even if rent growth slows, it takes time for that to feed into the CPI. Luna: So for now, your raise's real value still depends a lot on your ZIP code. If you're job hunting, it might make sense to look at the local numbers, not just the national trends. Lucas: And that's the practical takeaway. If you're negotiating a raise or considering a move, look up the metro-level wage data from the Bureau of Labor Statistics. Compare your industry's pay in different cities, but also look at local rent indexes. A five percent raise in San Francisco might be worth less than a three percent raise in Raleigh, depending on your housing situation. Luna: That kind of granular analysis is exactly what we try to do on this show. We dig into the data so you can make better decisions. Lucas: And we do it without ads. That's a deliberate choice. If you find these episodes useful, you can support the show at buy me a coffee dot com slash fexingo. It's a simple way to keep the podcast independent and ad-free. Luna: Yeah, it really helps us keep doing this deep-dive research. No pressure, just if it's valuable to you. Lucas: Back to the regional story. One other finding from the Fed paper: the gap isn't just between coasts and Sun Belt. Even within regions, there's variation. For example, wage growth in the Midwest has been pretty solid, around two point five percent real, but that's concentrated in a few metro areas like Columbus and Indianapolis. Rust Belt cities like Cleveland and Detroit have lagged. Luna: So it's not a simple red state blue state thing. It's about specific local industries and how they're recovering. Lucas: Right. Columbus has a strong logistics and finance sector. Indianapolis has been attracting tech investment. Cleveland's economy is still more reliant on manufacturing, which hasn't bounced back as strongly. Luna: And that ties back to the national job openings number we saw this week. The April JOLTS report showed seven point six million openings, the highest in nearly two years. But that strength is unevenly distributed. Lucas: Exactly. The national number looks healthy, but a lot of those openings are in the South and West. So the geography of opportunity is shifting. Workers who are mobile and can relocate to where the jobs are may benefit. But that's not an option for everyone. Luna: And moving isn't cheap. If you uproot your family for a better-paying job, you're also facing moving costs, maybe a higher mortgage rate if you buy a house now. Lucas: That's a real barrier. And it's one reason why the national labor market can seem tight on paper while many workers still feel stuck. The frictions are real. Luna: So what does this mean for the average listener? If you're not planning to move, how do you make sure your raise keeps up? Lucas: First, know your local inflation rate. The Bureau of Economic Analysis publishes regional price parities. You can see how your city's cost of living compares to the national average. If your local inflation is running above national, you need to factor that into your ask. Luna: And second, keep an eye on what similar jobs pay in other regions. Even if you don't move, that data gives you leverage in salary negotiations. Your employer knows they could lose you to a company in a lower-cost city that offers remote work. Lucas: That's a great point. Remote work has actually complicated this regional picture. Some companies adjust salaries based on where you live. So if you move from San Francisco to Boise, your pay might get cut. But if you stay in San Francisco and your employer hires remote workers in Boise, they might benchmark wages to the lower cost market. Luna: So the geography of your paycheck is becoming more complex, not less. And it's something we'll keep following as the data evolves. Lucas: Absolutely. Next episode, we're going to look at one specific industry where this regional divergence is particularly stark: healthcare. Wages for nurses and aides have been growing very differently depending on the state, and it's affecting patient care. Until then, keep an eye on your local numbers.