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Rate of Private Sector Wage Gains to Slow Further, BNA Index Signals

NEWS RELEASE

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

Arlington, Va. (April 15, 2009) – The rate of annual wage increases in private industry will continue to slow in the coming months, the final first quarter Wage Trend Indicator™ (WTI) released today by BNA predicts.

The WTI fell to 99.35 (second quarter 1976 = 100), down from 100.14 in the fourth quarter 2008 and the lowest reading since late 2004, according to BNA, a leading publisher of specialized news and information.

“The WTI is confirming that the bad job market has continued to worsen,” Kathryn Kobe, an economist who worked on the index’s development for BNA, said. The first quarter index signals that job losses, weak hiring, and expected lower inflation will put further downward pressure on the pace of wage growth in the coming months, Kobe said.

Annual wage gains in the private sector as a whole are expected to fall to less than 2.0 percent later this year, which would be the lowest on record since the Department of Labor’s Bureau of Labor Statistics began tracking such figures in 1980, Kobe said. In the fourth quarter 2008, year-over-year wage growth slowed to 2.6 percent from 3.3 percent in 2007, according to BLS’s most recent employment cost index (ECI).

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 private sector wage increases, while a sustained increase forecasts greater pressure to raise wages.

The fact that six of the WTI’s seven components made negative contributions to the final first quarter reading “suggests the continuation of a very weak job market,” said Joel Popkin, who developed the index for BNA. “Job losers as a share of unemployment remain a drag on the WTI, and employers’ plans to hire production and service workers continue to slide,” Popkin said. Job losers, as tracked in DOL’s monthly employment report, and employers’ hiring plans, which are measured in BNA’s quarterly Employment Outlook Survey, were among the largest negative contributors to the index.

Contributions of Components

The six negative components of the final first quarter WTI were: the share of job losers in the labor force and the unemployment rate, both from DOL’s monthly employment report; the expected inflation rate, compiled by the Federal Reserve Bank of Philadelphia; the shares of employers planning to hire production and service workers in the coming months and reporting difficulty in filling professional and technical jobs, both from BNA’s Employment Outlook Survey; and industrial production, tracked by the Federal Reserve Board. The remaining WTI component, average hourly earnings of production and nonsupervisory workers, also reported by BLS, was the only positive factor.

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, May 19, 2009 (preliminary second quarter)

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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 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.