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Preliminary Second-Quarter BNA Index Predicts Pickup in Wage Gains

NEWS RELEASE

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

Washington, D.C. (May 18, 2006) – The Wage Trend Indicator™ (WTI) continues to point to moderate acceleration in the rate of private-sector wage increases in the coming months, according to preliminary second-quarter figures released today by BNA, Inc., a Washington, D.C.-based news publisher.

The preliminary second-quarter WTI of 100.50 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 1997-98.

“The labor market factors that influence wage growth are in place for a modest acceleration ,” said economist Kathryn Kobe, who worked on the development of the index for BNA. “Overall, we think the trend in the rate of wage increases should be upward.”

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

“The longer-than-usual lag between a pickup in the WTI and the ECI reinforces my view that there have been structural changes in the U.S. labor market, and that the wage increases are being impacted by developments in foreign markets,” said economist Joel Popkin, who developed the WTI for BNA . Because of structural change in U.S. industries exposed to foreign competition, many workers' ability to aggressively pursue higher wages has been undercut, 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 May, four of the WTI's seven components made positive contributions to the index, while two components were negative and one was neutral, Kobe said.

Contributions of Components

The four WTI components that made positive contributions to the preliminary second-quarter index are: employers' hiring plans for production and service workers, as shown by 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 components were industrial production, measured by the Federal Reserve, and job losers as a percentage of the labor force, from BLS's employment report. One component did not change from the prior quarter and was neutral: employers' difficulty in filling professional and technical jobs, based on data from BNA's employment survey.

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:

Tuesday, June 20 (revised second 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 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.

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