Pay raises across Southern California have shrunk to their smallest level in five years – hikes that barely keep pace with inflation.
With government economic data delayed by the federal government shutdown, any hint of business conditions draws a larger-than-normal spotlight.
To gauge job market conditions, my trusty spreadsheet reviewed the Wednesday, Dec. 10 release of the quarterly Employment Cost Index. It tracks what bosses pay their employees across 15 U.S. regions, including a five-county Southern California area.
This local yardstick of wages and salaries in Los Angeles, Orange, Riverside, San Bernardino and Ventura counties shows compensation growing at a 3.4% annual rate in the third quarter, down from 4.1% in the second quarter and 4.8% in the third quarter of 2024.
It’s painful for struggling household budgets. These are the smallest local wage hikes since the third quarter of 2020, when the pandemic was upending the economy. Since then, local raises have averaged 5.1%.
Additionally, inflation is eroding the value of these pay raises. According to the Consumer Price Index for September, the cost of living was rising at a 3.5% annual rate in Los Angeles and Orange counties and 4% in the Inland Empire.
These cooler wage hikes of late 2025 reinforce trends showing local employers pulling back on staffing this year, as pay is often used to retain and attract workers. Southern California bosses were hiring at half the historic pace in the last local job report, as of August. The next report, for September, is due to be released on Friday, Dec. 12.
Nationally, pay raises are cooling more modestly. U.S. wages and salaries rose at a 3.6% annual rate in the third quarter. Yes, that’s up from 3.5% in the second quarter but down from 3.8% in the third quarter of 2024.
The third quarter marks the first time since the first quarter of 2023 that national raises have outpaced those in Southern California.Since 2006, when this local index began, Southern California raises have topped the nation on average by 3.2% to 2.9%.
Shrinking pay hikes aren’t just a local thing. Among the 14 other regions tracked, third-quarter raises topped the second-quarter level in just six regions and were larger than a year ago in only five.
The largest third-quarter raises among the 15 job markets were in Miami, up at a 5.9% annual rate. The smallest hikes were in Washington, D.C., at 1.9%. Southern California ranked No. 9.
Jonathan Lansner is the business columnist for the Southern California News Group. He can be reached at jlansner@scng.com