Rate of Wage Growth Likely to Turn Around, BNA Index Predicts

August 17, 2010

ARLINGTON, Va., Aug. 17 /PRNewswire-USNewswire/ — The pace of wage growth in the private sector likely will pick up in the coming months from recent historic lows, according to the preliminary third quarter Wage Trend Indicator(TM) (WTI) released today by BNA, a leading publisher of specialized news and information.

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The WTI rose to 96.97 (second quarter 1976 = 100) from 96.85 in the second quarter. If confirmed by the revised and final readings, it would be the index’s first gain in more than two years, ending nine straight quarterly declines, dating back to early 2008.

“The increase in the latest WTI is pointing to an improvement in labor market conditions — albeit a small one,” economist Kathryn Kobe, a consultant who maintains and helped develop BNA’s WTI database, said. “The rate of wage increases should show a turnaround in the coming months, but I think it’s going to be a slow change in that direction,” Kobe said.

Year-over-year wage and salary increases for private sector employees in the coming months are expected to equal or exceed the 1.6 percent recorded over the 12 months ended in June, as measured by the Department of Labor’s employment cost index (ECI). During the past year, the rate of annual wage growth has ranged from a record low of 1.4 percent to 1.6 percent.

Reflecting recent labor market conditions, three of the WTI’s seven components made positive contributions to the preliminary third quarter reading, while two components were negative and two others were neutral.

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 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.

Contributions of Components

Of the WTI’s seven components, the three positive components in the preliminary third quarter reading were job losers as a share of the labor force, from DOL; industrial production, measured by the Federal Reserve Board; and the share of employers planning to hire production and service workers in the coming months, also shown in BNA’s quarterly Employment Outlook Survey. The negative contributors were the unemployment rate, reported by DOL, and economic forecasters’ expectations for the rate of inflation, compiled by the Federal Reserve Bank of Philadelphia. Two components were neutral: the proportion of employers reporting difficulty in filling professional and technical jobs, tracked by BNA’s employment survey, and average hourly earnings of production and nonsupervisory workers, from DOL.

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 BNA’s WTI home page at http://www.wagetrendindicator.com.

The next report of the Wage Trend Indicator(TM) will be released on Wednesday, Sept. 15, 2010 (revised third quarter)

BNA is a leading publisher of print and electronic news, analysis, and reference products, providing intensive coverage of legal and regulatory developments for professionals in business and government. BNA produces more than 200 news and information services, including the highly respected Daily Labor Report and Daily Report for Executives.

Dr. Joel Popkin, who developed the WTI for BNA, is acknowledged as one of the country’s foremost authorities on the measurement and analysis of wages and prices. 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 BNA, is director of price, wage, and productivity analysis at Economic Consulting Services LLC.


Source: newswire

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