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Final Second-Quarter BNA Index Signals 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. (July 18, 2006) – Moderate acceleration in the rate of private sector wage increases is likely in the coming months, according to the final second-quarter Wage Trend Indicator™ (WTI) released today by BNA, a Washington, D.C.-based news publisher.

The July WTI reading of 100.72 is up from the final first-quarter index of 100.19 (second quarter 1976 = 100), marking the eighth consecutive quarterly increase in the WTI. The last time that happened was in 1997-1998.

“The labor market has been tightening sufficiently to accelerate wage growth at a time when employers may find that there are fewer available workers in the labor pool,” said economist Kathryn Kobe, who worked on the development of the index for BNA.

“This month's very positive WTI reading, coming on top of a long string of increases, continues to suggest that acceleration in year-over-year wage increases is imminent,” said economist Joel Popkin, who developed the WTI for BNA.

According to the employment cost index (ECI) produced by the Labor Department's Bureau of Labor Statistics, private sector wages in the first quarter were 2.4 percent higher than a year earlier, compared with a fourth-quarter gain of 2.5 percent,.

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.

Five of the WTI's seven components made positive contributions to the final second-quarter index, while two components were negative, Kobe said.

The biggest boost came from an increase in the share of employers reporting difficulty in filling professional and technical job openings, according to the quarterly BNA Employment Outlook Survey, Kobe said. “With the unemployment rate down to 4.6 percent, it's clearly getting harder to find professional and technical workers,” Kobe said.

Contributions of Components

The five WTI components that made positive contributions to the final second-quarter index were: employers' difficulty in filling professional and technical jobs and employers' hiring plans for production and service workers, both based on the quarterly BNA Employment Outlook Survey; expected inflation, compiled by the Federal Reserve Bank of Philadelphia; and the national unemployment rate and average hourly earnings of production and nonsupervisory workers, both from BLS's monthly employment report. The two negative WTI components were industrial production, from the Federal Reserve, and job losers as a percentage of the labor force, from BLS's employment report.

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, August 18 (preliminary third quarter 2006)

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BNA 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.