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Preliminary BNA Index Suggests Pause in Acceleration 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. (May 16, 2007) – The rate of private sector wage growth is unlikely to accelerate in the coming months, according to the preliminary second quarter Wage Trend Indicator™ (WTI)released today by BNA, a Washington, D.C.-based news publisher.

The preliminary WTI of 100.76 for the second quarter is down from the final first quarter index of 100.80 (second quarter 1976 = 100). Since rising steadily for nine quarters to a peak of 100.85 in the third quarter 2006, the WTI has fluctuated within a narrow range.

“While the latest WTI is not giving a clear indication of the direction of wages, it suggests we are in a holding pattern,” said economist Kathryn Kobe, who worked on the development of the index for BNA.

Over the 12 months ended in March, private sector wages rose 3.6 percent, compared with a 2.4 percent gain over the year ended in March 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.

“The preliminary second-quarter WTI is not too different from the readings we’ve been getting lately, but on balance, there is no reason to expect an acceleration in wage increases during the rest of the year,” said economist Joel Popkin, who developed the WTI for BNA.

Although only two of the WTI’s seven components made negative contributions to the preliminary second-quarter index, they outweighed three positive components, while two others were neutral, Kobe said. Helping to lower the index was a drop in the proportion of employers planning to hire production and service workers, based on BNA’s quarterly Employment Outlook Survey.

Contributions of Components

The second WTI component that made a negative contribution to the preliminary second- quarter index was average hourly earnings of production and nonsupervisory workers, from BLS’s monthly employment report. The three positive contributors were the expected inflation rate, compiled by the Federal Reserve Bank of Philadelphia; the unemployment rate, from BLS; and industrial production, tracked by the Federal Reserve Board. The neutral components were job losers as a percentage of the labor force, from BLS, 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 on:

Tuesday, June 19 (revised 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.