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Rate of Wage Growth Unlikely to Accelerate, Initial 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. (Feb. 21, 2007) – The rate of private sector wage increases is likely to show little, if any, further acceleration in the coming months, according to the preliminary first quarter 2007 Wage Trend Indicator™ (WTI) released today by BNA®, a Washington, D.C.-based news publisher.

The preliminary WTI of 100.70 for the first quarter is down from the final fourth quarter 2006 index of 100.78 (second quarter 1976 = 100). If confirmed by more complete data in the final reading, the first-quarter reading would mark the second consecutive decline in the WTI following a string of nine consecutive quarterly increases.

“Although the latest WTI reading is preliminary, it suggests some softening of the labor market forces that have been putting upward pressure on wages,” said economist Kathryn Kobe, who worked on the development of the index for BNA. “We’re expecting little, if any, further acceleration in wage growth.”

Over the 12 months ended in the fourth quarter 2006, private sector wages rose 3.2 percent, up from 2.5 percent the prior year, 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.

Four of the WTI’s seven components made negative contributions to the preliminary first-quarter reading, while two others were neutral and one was positive, Kobe said. Helping to pull down the index was a decline 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

The other WTI components that made a negative contribution to the preliminary first quarter index were the expected inflation rate, compiled by the Federal Reserve Bank of Philadelphia, and average hourly earnings of production and nonsupervisory workers and job losers as a percentage of the labor force, both from BLS’s monthly employment report. The only positive contributor to the WTI was the unemployment rate, produced by BLS. 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.

This month's WTI report incorporates annual revisions to historical data based on revised component data published recently by BLS and 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:

Tuesday, March 20 (revised first 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.