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BNA Index Predicts Continued Modest Pickup 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. (Oct. 18, 2006) – The rate of private sector wage increases is likely to accelerate modestly in the coming months, according to the final third quarter Wage Trend Indicator™ (WTI) released today by BNA, a Washington, D.C.-based news publisher.

The final WTI reading of 100.85 for the third quarter is up from the final second quarter index of 100.72 (second quarter 1976 = 100), marking the ninth consecutive quarterly increase in the WTI. The last time that happened was in 1996-1998.

“The WTI indicates that labor markets have tightened sufficiently to put modest upward pressure on wages,” said economist Kathryn Kobe, who worked on the development of the index for BNA. “However, the growing uncertainty about a slowing economy, the housing sector, and other factors could change that picture in the coming months.”

According to the employment cost index (ECI) produced by the Labor Department's Bureau of Labor Statistics, private sector wages in the second quarter were 2.8 percent higher than a year earlier, up from a first-quarter gain of 2.4 percent.

“The third quarter's final WTI reading suggests that wage behavior will continue to exhibit recent trends, with a likelihood that year-over-year increases will edge up further,” in subsequent ECI reports, 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.

Four of the WTI's seven components made positive contributions to the index's final third quarter reading, while three components were negative, Kobe said.

The largest positive contribution came from an increase in the share of employers planning to hire production and service workers in the coming months, based on the quarterly BNA Employment Outlook Survey, Kobe said.

Contributions of Components

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

Friday, November 17 (preliminary 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.