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Preliminary BNA Index Points to Possible Slowing in Rate of Wage Growth

NEWS RELEASE

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

Washington, D.C. (Nov. 17, 2006) – The rate of private sector wage increases is expected to level off or slow slightly in the coming months, according to the preliminary fourth quarter Wage Trend Indicator™ (WTI) released today by BNA, a Washington, D.C.-based news publisher.

The preliminary WTI of 100.74 for the fourth quarter is lower than the final third quarter index of 100.85 (second quarter 1976 = 100). If the reading doesn't change during the remainder of the fourth quarter, the decline would end a string of nine consecutive quarterly increases in the WTI. The last time the WTI fell was in the second quarter of 2004, reaching 98.55.

“Although the preliminary reading is based on incomplete data, the WTI is suggesting that pressures in the labor markets to increase wages are easing somewhat because of a mixed economic picture,” said economist Kathryn Kobe, who worked on the development of the index for BNA.

According to the employment cost index (ECI) produced by the Labor Department's Bureau of Labor Statistics, private sector wages in the third quarter rose 3 percent from a year earlier, up from a second quarter gain of 2.8 percent.

“This latest WTI reading may be the first signal we have that the rate of wage growth will reach a plateau if not in fact show some modest deceleration,” said economist Joel Popkin, who developed the WTI for BNA.

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.

Three of the WTI's seven components made negative contributions to the preliminary fourth quarter reading, while two others were positive and two were neutral, Kobe said. The two largest negative contributions came from declines in the expected rate of inflation and in the share of employers planning to hire production and service workers in the coming months, based on BNA's quarterly Employment Outlook Survey.

Contributions of Components

In addition to employers' hiring plans for production and service workers and the expected inflation rate, as compiled by the Federal Reserve Bank of Philadelphia, the third WTI component that made a negative contribution to the preliminary fourth quarter index was the average hourly earnings of production and nonsupervisory workers, from BLS's monthly employment report. The two positive WTI components were the national unemployment rate and job losers as a percentage of the labor force, both from BLS's monthly employment report. The two neutral components were industrial production, tracked by the Federal Reserve, and the share of employers reporting difficulty in filling professional and technical jobs, measured by BNA's employment survey.

BNA's Wage Trend Indicator™ 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 home page at: www.wagetrendindicator.com.

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

Tuesday, December 19 (revised fourth 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.