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Rate of Wage Growth Likely to Hold Steady, BNA Index Shows

NEWS RELEASE

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

Washington, D.C. (April 17, 2007) – The pace of private sector wage increases is likely to remain little changed in the coming months, according to the final first quarter 2007 Wage Trend Indicator™ (WTI)released today by BNA, a Washington, D.C.-based news publisher.

The final WTI of 100.80 for the first quarter is up from the final fourth quarter 2006 index of 100.78 (second quarter 1976 = 100). The slight increase follows a fourth-quarter decline, which was the first drop in more than two years.

“The latest WTI is very little changed from the end of 2006, signaling that a further acceleration in the rate of wage growth is unlikely,” said economist Kathryn Kobe, who worked on the development of the index for BNA.

Over the year ended in the fourth quarter 2006, private sector wages rose 3.2 percent, up from 3.0 percent over the year ended in the third quarter, according to the employment cost index (ECI) produced by the Labor Department's Bureau of Labor Statistics.

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 a deceleration in the rate of wage increases in the private sector. A sustained increase predicts greater pressure to raise wages.

“The final first quarter WTI suggests we should look for year-over-year wage gains to continue to fluctuate in a range just above and just below the 3.0 percent level,” said economist Joel Popkin, who developed the WTI for BNA.

Two of the WTI’s seven components made positive contributions to the increase in the final first-quarter index, while four others were negative and one was neutral, Kobe said. Helping to boost the index was an increase in the share of employers reporting difficulty in filling professional and technical jobs, based on BNA’s quarterly Employment Outlook Survey.

Contributions of Components

The second WTI component that made a positive contribution to the final first quarter index was the unemployment rate, from BLS’s monthly employment report. The four negative contributors were the expected inflation rate, compiled by the Federal Reserve Bank of Philadelphia; the proportion of employers planning to hire production and service workers in the coming months, from BNA’s employment survey; and average hourly earnings of production and nonsupervisory workers and job losers as a percentage of the labor force, both from BLS’s employment report. The neutral component was industrial production, tracked by the Federal Reserve.

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:

Wednesday, May 16 (preliminary second quarter 2007)

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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.