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Preliminary First-Quarter BNA Index Forecasts Pickup in Wage Growth

NEWS RELEASE

Contacts:
Karen James Cody,
BNA - Press Contact
Joel Popkin - (202) 466-9063
Kathryn Kobe - (202) 466-7720

Washington, D.C. (February 17, 2006) – The preliminary Wage Trend Indicator™ (WTI) for the first quarter of 2006 continues to point to moderate acceleration in the rate of private-sector wage growth in the coming months, according to figures released today by BNA, Inc. , a Washington, D.C.-based news publisher.

“T he WTI remains at the highest level in four years,” said economist Kathryn Kobe, who worked on the development of the index for BNA. “Overall, we still expect wage increases to accelerate from where they are now, though only modestly.”

The February WTI reading of 100.32 for the first quarter is an increase from the final fourth-quarter index of 100.16 (second quarter 1976 = 100) and is the second consecutive reading above 100. The WTI last exceeded 100 from late 1997 through mid-2001.

Private-sector wages in the fourth quarter had their strongest gain in more than a year, Kobe said. Wages rose 2.5 percent from a year earlier, according to the employment cost index (ECI) produced by the Labor Department's Bureau of Labor Statistics. That was up from a 2.2 percent increase in the third quarter.

Yet growth is unlikely to reach the 3.5-percent level last seen in the late 1990s and early 2000s, according to economist Joel Popkin, who developed the WTI for BNA . Primarily because of structural changes in U.S. industries exposed to foreign competition, s ome workers' ability to aggressively pursue higher wages has been undercut, he said.

“While labor markets showed some strengthening over the past year, I think it is unlikely that the ECI will return to its pre-recession increases in the near future,” Popkin 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 ECI. A sustained decline in the WTI is predictive of deceleration in the rate of wage increases in the private sector. A sustained increase predicts greater pressure to raise wages.

In February, three of the WTI's seven components made positive contributions to the index, while two components were neutral and two were negative, Kobe said.

Contributions of Components

The three components of the WTI that made positive contributions to the preliminary first-quarter index are: employers' hiring plans for production and service workers, as shown by the quarterly BNA Employment Outlook Survey, and the national unemployment rate and job losers as a percentage of the labor force, both from BLS's monthly employment report. The two negative components were industrial production, measured by the Federal Reserve, and average hourly earnings from the employment report. Two components did not change from the prior quarter and were neutral: expected inflation, compiled by the Federal Reserve Bank of Philadelphia , and employers' difficulty in filling professional and technical jobs, from BNA's employment survey.

This month's WTI report incorporates annual revisions to historical data based on revised component data published recently by BLS and the Federal Reserve.

BNA's Wage Trend Indicator™ was 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.

More information on the Wage Trend Indicator is available on BNA's home page at: www.wagetrendindicator.com.

The next report of the Wage Trend Indicator™ will be released on:

Friday, March 17 (revised first quarter 2006)

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BNA, Inc. is the foremost 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 the Daily Report for Executives .

Dr. Popkin 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 almost 35 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.

To obtain Wage Trend Indicator™ reports by e-mail on a regular basis, contact Ted Gideon, BNA PLUS, (800) 372-1033.