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Final Fourth-Quarter BNA Index Predicts 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. (January 18, 2006) ­–­ The final Wage Trend Indicator™ (WTI) for the fourth quarter of 2005 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, a Washington, D.C.-based news publisher.

“T he WTI remains at the highest level in four years, signaling that the factors that normally influence wage increases are in place to generate upward pressure on wages,” said economist Kathryn Kobe, who worked on the development of the index for BNA.

The January WTI reading of 100.02 for the fourth quarter is an increase from the final third-quarter index of 99.75 (second quarter 1976 = 100). The WTI last exceeded 100 in the third quarter of 2001.

However, wage growth has not kept pace, according to economist Joel Popkin, who developed the WTI for BNA . Private-sector wages in the third quarter were 2.2 percent higher than a year earlier, as measured by the employment cost index (ECI) produced by the Labor Department's Bureau of Labor Statistics. Prior to the 2001 recession, wages were rising about 3.5 percent a year, Popkin 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, primarily because of structural changes in the U.S. industries that are exposed to foreign competition,” Popkin said. Low-cost imports have undercut some U.S. workers' ability “to aggressively pursue higher wages,” he 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 December, four of the WTI's seven components made positive contributions to the final fourth-quarter index, while one component was neutral and two were negative, Kobe said.

Contributions of Components

The four components of the WTI that made positive contributions to the revised fourth-quarter index are: employers' hiring plans for production and service workers and difficulty in filling professional and technical jobs, as shown by the quarterly BNA Employment Outlook Survey, and average hourly earnings 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 expected inflation, compiled by the Federal Reserve Bank of Philadelphia. One component was unchanged from the prior quarter and was neutral: the national unemployment rate.

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, Feb. 17 (preliminary 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.