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Wage Increases Likely to Slow Further, BNA Index Shows

NEWS RELEASE

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

Arlington, Va. (Feb. 18, 2009) – The rate of wage increases in the private sector likely will slow further in the coming months, according to the preliminary first quarter Wage Trend Indicator™ (WTI) released today by BNA, a leading publisher of specialized news and information.

The WTI fell to 99.59 (second quarter 1976 = 100), down from the fourth quarter 2008 reading of 100.14. The index has declined steadily over the past year.

“The WTI now has fallen below 100 for the first time since 2005,” said economist Kathryn Kobe, who worked on the index’s development for BNA, said. “Right now, the outlook for the job market is very dismal all the way around,” Kobe said. Lower expectations both for employment and for inflation reduce the pressure on employers to raise wages, she said.

Kobe expects the annual rate of increase in private sector wages later this year to drop below 2.0 percent, which would be the lowest on record since the Department of Labor’s Bureau of Labor Statistics began tracking such figures in 1980. In the fourth quarter of 2008, the most recent data available, the pace of year-over-year wage growth slowed to 2.6 percent from 3.3 percent in the same period of 2007, according to BLS’s 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.

Consistent with the weak labor market, five of the WTI’s seven components made negative contributions to the preliminary first quarter reading, while one was neutral and one was positive. The largest negative contributor was the share of employers planning to hire production and service workers, as shown in BNA’s quarterly Employment Outlook Survey.

Contributions of Components

The other negative contributors to the preliminary 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; and industrial production, tracked by the Federal Reserve Board. The only positive component was average hourly earnings of production and nonsupervisory workers, measured by BLS. The neutral factor was the share of employers reporting difficulty in filling professional and technical jobs, contained in BNA’s Employment Outlook Survey.

This month's WTI report incorporates annual revisions to historical data based on revised component data published recently by BLS and the Federal Reserve.

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 Wednesday, March 18, 2009 (revised first 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.