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Southern California pay raises shrink to 5-year low

February 18, 2026

Here’s another reason folks are feeling grumpy about their finances these days: Southern California wage growth hit a five-year low as 2025 ended.

My trusty spreadsheet looked at the Employment Cost Index for private-industry workers for the fourth quarter of 2025. This index tracks what bosses pay in wages and salaries across 15 major U.S. job markets, including a local area comprising Los Angeles, Orange, Riverside, San Bernardino and Ventura counties.

This math shows that the typical Southern California boss increased wages at a 3.2% annual rate at year-end 2025. How skimpy is that?

Well, those raises ranked a middling No. 8 among the 15 job markets tracked. Southern California trailed the national rate of 3.3%, marking only the third time since 2000 that local raises have not exceeded those given to U.S. workers.

Plus, it’s the smallest increase since a 3.1% hike in 2020’s third quarter.

At least local pay hikes beat the 2.6% raises in the Bay Area – their lowest since 2.1% in 2021’s first quarter.

You can blame the compressed compensation on shrinking labor demand.

Southern California employers trimmed workers last year, with the five counties’ combined employment down by 9,000 positions, according to state jobs data. The region averaged 97,000 new jobs annually over the previous 10 years.

Sharp change

California consumer confidence dropped to a five-year low to start 2026, just as generous wage growth seems to have ended.

It’s a sharp change. Southern California bosses upped pay at a 4.8% annual pace over the past six years, the highest among the 15 U.S. regions and topping the 4%-a-year gains nationally and in the Bay Area.

Let’s also not forget the days after the Great Recession, when bosses had the upper hand in paycheck growth.

Southern California wages grew at only a 2.5%-a-year pace in 2010-19. Still, that was No. 3 among 15 regions and topped the 2.2% pace seen nationally. Yes, raises ran 2.7% yearly in the Bay Area.

Inflation beater

Let me offer modest consolation for these locally shrinking raises. The growth in typical local paychecks still outpaces the upswing in the cost of living.

The fourth quarter’s 3.2% wage growth bested the 2.7% U.S. inflation rate, based on the Consumer Price Index.

Not that inflation was beaten every quarter over the past 6 years, but the region’s 4.8% average wage growth since 2000 outpaced the 4%-a-year pace of cost-of-living increases.

And in 2010-19, Southern California’s average 2.5% annual pay hikes exceeded the period’s 1.8% inflation rate.

Jonathan Lansner is the business columnist for the Southern California News Group. He can be reached at jlansner@scng.com

Orange County Register

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Southern California pay raises shrink to 5-year low

Sharp change

Inflation beater

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