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Final Fourth-Quarter BNA Index Predicts Steady 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. (Jan. 17, 2007) – The pace of private sector wage increases is likely to remain steady or show only minimal acceleration in the coming months, according to the final fourth quarter 2006 Wage Trend Indicator™ (WTI) released today by BNA® a Washington, D.C.-based news publisher.

The final WTI of 100.80 for the fourth quarter is down from the final third quarter 2006 index of 100.85 (second quarter 1976 = 100). The decline is the first since the second quarter of 2004 and follows a string of nine consecutive quarterly increases in the WTI.

“Despite the small decline, the WTI remains higher than it was a year ago at this time,” said economist Kathryn Kobe, who worked on the development of the index for BNA. “The latest WTI reading suggests a bit of weakening in the labor market forces that have been putting upward pressure on wages.”

Over the 12 months ended in the third quarter, private sector wages rose 3 percent, up from 2.3 percent in the 12 months ended in the same quarter of 2005, according to the employment cost index (ECI) produced by the Labor Department's Bureau of Labor Statistics.

“The final fourth quarter WTI reading indicates we probably won’t see any noteworthy acceleration in the rate of wage growth in 2007,” 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 a deceleration in the rate of wage increases in the private sector. A sustained increase predicts greater pressure to raise wages.

Three of the WTI’s seven components made negative contributions to the final fourth-quarter reading, while three others were positive and one was neutral, Kobe said. The two largest negative contributions came from declines in the expected rate of inflation and 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

In addition to employers' hiring plans for production and service workers and the expected inflation rate, as compiled by the Federal Reserve Bank of Philadelphia, the third WTI component that made a negative contribution to the final fourth quarter index was the average hourly earnings of production and nonsupervisory workers, from BLS’s monthly employment report. Making positive contributions to the WTI were the share of employers reporting difficulty in filling professional and technical jobs, measured by BNA’s employment survey, and the unemployment rate and job losers as a percentage of the labor force, both from BLS’s monthly 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, Feb. 21 (preliminary 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.