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Slowdown in Rate of Wage Growth to Continue, BNA Index Shows

NEWS RELEASE

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

Arlington, Va. (January 15, 2009) – The slowdown in the rate of private sector wage growth likely will continue in the coming months, according to the final fourth quarter 2008 Wage Trend Indicator™ (WTI) released today by BNA, a leading publisher of specialized news and information.

The WTI declined for the third consecutive quarter to 100.12 (second quarter 1976 = 100), down sharply from the third quarter index of 100.67.

“The latest WTI is indicating that there will be a significant slowing in year-over-year wage increases in the next six months,” economist Kathryn Kobe, who worked on the index’s development for BNA, said. “The rapidly worsening labor market will eliminate any ability for the vast majority of workers to negotiate higher wages,” Kobe said.

Annual growth in private sector wages could decelerate to as little as 2.0 percent or less later this year, Kobe said. In the third quarter of 2008, the most recent data available, the pace of wage growth slowed to 2.9 percent from 3.4 percent in the same period a year earlier, according to the Department of Labor'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.

“The final fourth quarter WTI suggests that there is no reason to expect a pick-up in the rate of wage increases, probably for the rest of 2009,” said economist Joel Popkin, who developed the WTI for BNA.

Consistent with the weak labor market, five of the WTI’s seven components made negative contributions to the latest reading, while one was neutral and one was positive. The largest negative contributor was the share of job losers in the labor force, as reported by the Labor Department—a number that has increased rapidly in recent months.

Contributions of Components

The other negative contributors to the final fourth quarter WTI were the unemployment rate, from DOL’s monthly employment report; the share of employers planning to hire production and service workers and the share of employers reporting difficulty in filling professional and technical jobs, both from BNA’s Employment Outlook Survey; and the expected inflation rate, compiled by the Federal Reserve Bank of Philadelphia. The only positive component was average hourly earnings of production and nonsupervisory workers, from BLS. 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 Wednesday, Feb. 18, 2009 (preliminary 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.