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Preliminary BNA Index Predicts Wage Gains to Slow Even More

NEWS RELEASE

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

Arlington, Va. (August 18, 2009) – The rate of annual wage increases for private sector workers will continue to slow 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.

The WTI dropped to 97.99 (second quarter 1976 = 100) from 98.55 in the second quarter, marking the sixth consecutive decline.

“The index continues to show an extremely weak labor market, with no support for wage increases,” said Kathryn Kobe, a consultant who maintains and helped develop BNA’s WTI database. “We continue to expect that year-over-year wage increases will fall.”

Year-over-year wage gains overall in the private sector fell in the second quarter, to 1.6 percent, down from 2.6 percent in the calendar year 2008, according to Department of Labor data. Kobe said the latest reading of the WTI suggests that the rate of wage gains likely will slow even further, potentially reaching 1 percent growth or less on an annual basis, as measured by DOL’s employment cost index (ECI).

“Past readings of the bad economic situation, the present situation in the employment markets, as well as forward-looking indicators” all contributed to the decline in the forward-looking WTI, Kobe said.

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.

Reflecting the economic downturn, five of the WTI’s seven components made negative contributions to the preliminary third quarter reading, while two components were neutral. None of the components made positive contributions to the index.

The negative factors were job losers as a share of the labor force, the unemployment rate, and average hourly earnings of production and nonsupervisory workers, all reported by DOL; industrial production, tracked by the Federal Reserve Board; and a decline in the share of employers planning to hire production and service workers in the coming months, as determined by BNA’s quarterly employment outlook survey. The neutral components were forecasters’ expectations of inflation, compiled by the Federal Reserve Bank of Philadelphia; and the share of employers reporting difficulty in filling professional and technical jobs, also from BNA’s quarterly 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, September 15, 2009 (revised third 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 Daily Report for Executives.

Dr. Joel 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.