WTI Forecasts Plateau in Workers’ Wage Increases
ARLINGTON, Va., April 17, 2012 /PRNewswire-USNewswire/ — Workers in the private sector likely will see little or no change in the pace of annual wage growth in the coming months, according to the final first quarter Wage Trend Indicator(TM) (WTI) released today by Bloomberg BNA, a leading publisher of specialized news and information.
The index declined to 98.42 (second quarter 1976 = 100) from 98.56 in the fourth quarter of 2011, for the first decrease in nearly two years.
“We are still seeing slow improvements in the labor market, but the outlook for wage growth, for the moment, has hit a plateau,” economist Kathryn Kobe, a consultant who maintains and helped develop Bloomberg BNA’s WTI database, said. “Especially for new employees starting out, wages are being depressed a little bit because of the large pool of unemployed workers,” Kobe said.
Over its history, the WTI has predicted a turning point in wage trends six to nine months before the trends are apparent in the Department of Labor’s employment cost index (ECI). A sustained decline in the WTI is predictive of a deceleration in the rate of private sector wage increases, while a sustained increase forecasts greater pressure to raise wages.
Annual wage increases in the private sector are expected to be close to the 1.6 percent gain in 2011, as measured by the ECI.
Reflecting recent economic conditions, five of the WTI’s seven components made negative contributions to the final first quarter reading, while two factors were positive.
Contributions of Components
Of the WTI’s seven components, the five negative contributors to the final first quarter reading were forecasters’ expectations for the rate of inflation, compiled by the Federal Reserve Bank of Philadelphia; industrial production, measured by the Federal Reserve Board; average hourly earnings of production and nonsupervisory workers, reported by DOL; and the share of employers planning to hire production and service workers in the coming months and the proportion of employers reporting difficulty in filling professional and technical jobs, both tracked by Bloomberg BNA’s quarterly employment outlook survey. The positive factors were job losers as a share of the labor force and the unemployment rate, both reported by DOL.
Bloomberg BNA’s Wage Trend Indicator(TM) is designed to serve as a yardstick for employers, analysts, and policymakers to identify turning points in private sector wage patterns. It also provides timely information for business and human resource analysts and executives as they plan for year-to-year changes in compensation costs.
The WTI is released in 12 monthly reports per year showing the preliminary, revised, and final readings for each quarter, based on newly emerging economic data.
More information on the Wage Trend Indicator is available on Bloomberg BNA’s WTI home page at http://www.bna.com/wage-trend-indicator-p12884902670/.
The next report of the Wage Trend Indicator(TM) will be released on Tuesday, May 15, 2012 (preliminary second quarter).
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Dr. Joel Popkin, who is acknowledged as one of the country’s foremost authorities on the measurement and analysis of wages and prices, developed the WTI for Bloomberg BNA. Formerly an official with the Bureau of Labor Statistics, Dr. Popkin has been an analyst observing and predicting the U.S. economic outlook for 40 years. Kathryn Kobe, who worked with Popkin in designing the indicator for Bloomberg BNA, is director of price, wage, and productivity analysis at Economic Consulting Services LLC.
To obtain Wage Trend Indicator(TM) reports by e-mail on a regular basis, contact Jerry Walsh, BNA PLUS, 800-372-1033.
SOURCE Bloomberg BNA