• Return to previous page.

Text size:

Printable Version

Pace of Wage Increases May Slow, Preliminary BNA Index Signals

NEWS RELEASE

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

Arlington, Va. (August 19, 2008) - Wage increases in the private sector may slow from their recent pace in the coming months, according to the preliminary third quarter Wage Trend Indicator™ (WTI) released today by BNA, a leading publisher of specialized news and information for professionals.

The forward-looking index fell to 100.67 from the second quarter reading of 100.92 (second quarter 1976 = 100). If confirmed by more complete data in the final third quarter WTI to be released in October, this would mark the index’s second consecutive quarterly decline.

“Although the figures are preliminary, the latest WTI is suggesting that wage growth may dip below its recent pace,” said economist Kathryn Kobe, who worked on the development of the index for BNA.

“Impacts from the weakening labor market are likely to offset the upward pressure on wages coming from higher inflation,” Kobe said. With unemployment rising and fewer jobs being created, employers may be able find the workers they need in the available labor pool rather than having to hire them away from another job, she said.

Private sector wages rose 3.1 percent over the year ended in June, down from 3.3 percent in the 12 months ended in June 2007, 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 forecasts greater pressure to raise wages.

Reflecting the weak economy, four of the seven WTI components made negative contributions to the preliminary third quarter reading, while three were neutral. The largest negative factor was a drop in the share of employers planning to hire production and service workers, as shown by BNA’s quarterly Employment Outlook Survey.

Contributions of Components

Also making negative contributions to the preliminary third quarter WTI were the unemployment rate and job losers as a percentage of the labor force, both from BLS’s monthly employment report, and the expected inflation rate, compiled by the Federal Reserve Bank of Philadelphia. The three neutral components were average hourly earnings of production and nonsupervisory workers, from BLS; industrial production, tracked by the Federal Reserve Board; and the share of employers reporting difficulty in filling professional and technical jobs, as measured by 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 Thursday, Sept. 18 (revised third quarter)

# # # # #

BNA is a leading 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 who developed the WTI for BNA, 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 Jerry Walsh, BNA PLUS, 800-372-1033.