Holding Pattern for Wage Growth to Continue, WTI Shows
ARLINGTON, Va., Nov. 15, 2012 /PRNewswire-USNewswire/ — Little or no change in the pace of annual wage increases in the private sector is expected in the coming months, according to the preliminary fourth quarter Wage Trend Indicator(TM) (WTI) released today by Bloomberg BNA, a leading publisher of specialized news and information.
The index edged down to 98.47 (second quarter 1976 = 100) from 98.52 in the third quarter. If confirmed by the revised and final fourth quarter readings, the decline would be the second in a row. Over the past five quarters, the WTI has fluctuated within a narrow range from 98.40 to 98.67.
“The latest WTI suggests that wage growth is still in a holding pattern,” economist Kathryn Kobe, a consultant who maintains and helped develop Bloomberg BNA’s WTI database, said. “The labor market has been moving in the right direction, but there is a lot of uncertainty over efforts to avoid the fiscal cliff, which would send the economy into a tailspin,” Kobe said.
Kobe said she expects little or no change in annual wage gains in the private sector from the 1.8 percent increase over the year ended in the third quarter, as measured by the Department of Labor’s employment cost index (ECI). The WTI does not forecast the magnitude of wage growth, only the direction.
Over its history, the WTI has predicted a turning point in wage trends six to nine months before the trends are apparent in the ECI. A sustained increase in the WTI forecasts greater pressure to raise private sector wages, while a sustained decline is predictive of a deceleration in the rate of wage increases.
Reflecting mixed economic conditions, two of the WTI’s seven components made negative contributions to the preliminary fourth quarter reading that outweighed three positive factors, while two components were neutral.
Contributions of Components
Of the WTI’s seven components, the two negative contributors to the preliminary fourth quarter reading were average hourly earnings of production and nonsupervisory workers, as reported by DOL, and the share of employers planning to hire production and service workers in the coming months, as measured by Bloomberg BNA’s quarterly employment outlook survey. The positive factors were forecasters’ expectations for the rate of inflation, compiled by the Federal Reserve Bank of Philadelphia, and the unemployment rate and job losers as a share of the labor force, both from DOL. The neutral components were the proportion of employers reporting difficulty in filling professional and technical jobs, from Bloomberg BNA’s employment outlook survey, and industrial production, reported by the Federal Reserve Board.
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, Dec. 18, 2012 (revised fourth 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 Research & Custom Solutions, 800-372-1033.
SOURCE Bloomberg BNA