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Workers Face Smaller Wage Increases, BNA Index Signals

NEWS RELEASE

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

Arlington, Va. (July 15, 2009) – The rate of wage growth in the private sector is expected to slow further in the coming months, according to the final second quarter Wage Trend Indicator™ (WTI) released today by BNA, a leading publisher of specialized news and information.

The WTI dropped to 98.55 (second quarter 1976 = 100) from 99.35 in the first quarter, marking the fifth consecutive decline.

“The WTI is still pointing to continued deceleration in annual wage increases in the near term,” said economist Kathryn Kobe, a consultant who maintains and helped develop BNA’s WTI database. “Labor market conditions are extremely weak,” Kobe said.

Year-over-year wage gains overall in the private sector likely will fall below the record low of 2.0 percent posted in the first quarter, which was down from 2.6 percent in calendar year 2008, according to the Department of Labor’s employment cost index (ECI).

Rising unemployment and steady job losses during the recession have greatly expanded the pool of available labor, reducing the need for employers to raise wages and salaries to attract new workers and retain current ones, Kobe said. “We’re in a much different employment situation than just a couple of years ago,” she 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.

Contributions of Components

Reflecting the economic downturn, six of the WTI’s seven components made negative contributions to the final second quarter reading, while one component was positive. The negative factors were a decline in the share of employers planning to hire production and service workers in the coming months and the proportion reporting difficulty in filling professional and technical jobs, both from BNA’s quarterly Employment Outlook Survey; 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; and industrial production, tracked by the Federal Reserve Board. A rise in forecasters’ expectations for inflation, compiled by the Federal Reserve Bank of Philadelphia, 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, August 18, 2009 (preliminary 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.