• Return to previous page.

Text size:

Printable Version

Pace of Wage Increases Likely to Decline, Third Quarter BNA Index Says

NEWS RELEASE

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

Arlington, Va. (Oct. 15, 2008) - The pace of wage increases in the private sector is expected to decline in the coming months, according to the final third quarter Wage Trend Indicator™ (WTI) released today by BNA, a leading publisher of specialized news and information for professionals.

The forward-looking index declined for the second consecutive quarter to 100.67, down from a reading of 100.92 in the previous three-month period (second quarter 1976 = 100).

“The latest WTI is reflecting labor market conditions that became increasingly negative as the third quarter progressed,” economist Kathryn Kobe, who worked on the development of the index for BNA, said. “A combination of various factors, including the rising number of job losers, will lead to less pressure for wage increases in the coming months,” Kobe said.

“Looking ahead, the unemployment rate likely will continue to move up, and that will provide a drag on wage growth,” economist Joel Popkin, who developed the index for BNA, said. Another factor applying downward force on wage growth should be further easing in inflation expectations in response to recent sharp drops in crude oil prices, Popkin said.

Private sector wages rose 3.1 percent over the year ended in June, compared with 3.3 percent in the 12 months ended in June 2007, according to the most recent 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 labor market, five of the WTI’s seven components made negative contributions to the final third quarter index, while one was neutral and one was positive.

Contributions of Components

The five negative contributors to the final third quarter WTI were the unemployment rate, job losers as a percentage of the labor force, and average hourly earnings of production and nonsupervisory workers, all from BLS’s monthly employment report; the expected inflation rate, compiled by the Federal Reserve Bank of Philadelphia; and the share of employers planning to hire production and service workers, as shown by BNA’s Employment Outlook Survey. The only positive component was the share of employers reporting difficulty in filling professional and technical jobs, as measured by BNA’s employment survey. The neutral factor was industrial production, tracked by the Federal Reserve Board.

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, Nov. 18 (preliminary fourth 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.