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Wage Growth to Stay in Holding Pattern, Preliminary BNA Index Suggests

NEWS RELEASE

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

Washington, D.C. (Aug. 17, 2007) ­–­ Increases in private sector wages are likely to remain in the neighborhood of their recent levels in the coming months, according to the preliminary third-quarter Wage Trend Indicator™ (WTI) released today by BNA, a Washington, D.C.-based news publisher.

The preliminary WTI of 100.91 is up from the final second-quarter index of 100.85 (second quarter 1976 = 100). If confirmed by more complete data in the final reading, the third-quarter index would mark the third consecutive increase in the WTI.

“Although the WTI has risen slightly, the preliminary third-quarter reading suggests a continuation of the holding pattern in overall wage growth for the next several months,” said economist Kathryn Kobe, who worked on the development of the index for BNA.

Three of the WTI’s seven components made positive contributions to the preliminary third-quarter index, while two components were negative and two were neutral, Kobe said. Helping to boost the index was an increase in the proportion of employers planning to hire production and service workers, based on BNA’s quarterly Employment Outlook Survey.

Private sector wages rose 3.3 percent over the 12 months ended in June, up from a 2.8 percent gain over the year ended in June 2006, 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.

Kobe said the latest WTI indicates year-over-year gains will continue to be in the low-3 percent range.

Contributions of Components

Also making positive contributions to the preliminary third-quarter index were average hourly earnings of production and nonsupervisory workers, from BLS’s monthly employment report, and industrial production, tracked by the Federal Reserve Board. The two WTI components that made negative contributions were the unemployment rate and job losers as a percentage of the labor force, both from BLS. The two neutral components were the expected inflation rate, compiled by the Federal Reserve Bank of Philadelphia, and the proportion of employers reporting difficulty in filling professional and technical jobs, from 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 http://www.wagetrendindicator.com.

The next report of the Wage Trend Indicator™ will be released onTuesday, Sept. 18
(revised third 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 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.