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BNA Index Forecasts Additional Acceleration 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. (Sept. 19, 2006) – The pace of private sector wage growth is likely to pick up modestly in the coming months, according to the revised third quarter Wage Trend Indicator™ (WTI) released today by BNA, a Washington, D.C.-based news publisher.

The revised WTI reading of 100.86 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.

“We expect year-over-year wage increases to continue to accelerate modestly, even though the pace of job growth has slowed recently,” 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 second quarter were 2.8 percent higher than a year earlier, up from a first-quarter gain of 2.4 percent.

“This latest WTI reading is signaling that the ECI should show a further modest pickup in coming months,” said economist Joel Popkin, who developed the WTI for BNA. “At the same time, the decline in energy prices may take some pressure off worker demands for higher wages as lower inflation produces gains in real wages.”

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 revised third quarter index, while two components were negative, Kobe said.

The largest negative contribution came from a decline in the share of employers reporting difficulty in filling professional and technical jobs, according to the latest BNA Employment Outlook Survey, Kobe said. “Even so, employers are still reporting more difficulty in filling those jobs than they were at this time last year,” Kobe said.

Contributions of Components

The five WTI components that made positive contributions to the revised 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, job losers as a percentage of the labor force, and average hourly earnings of production and nonsupervisory workers, all from BLS's monthly employment report. The two negative WTI 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.

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:

Wednesday, October 18 (final 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.