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BNA Index Predicts Further Slowdown in Private Sector Wage Growth

NEWS RELEASE

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

Arlington, Va. (March 18, 2009) – The pace of private sector wage growth is expected to slow further in the coming months, according to the revised first quarter Wage Trend Indicator™ (WTI) released today by BNA, a leading publisher of specialized news and information.

The WTI dropped to 99.40 (second quarter 1976 = 100), down from the fourth quarter 2008 reading of 100.14. The index has fallen sharply over the past year.

“The WTI is confirming that the employment situation is extremely bad and that it will remain poor for some time,” Kathryn Kobe, an economist who worked on the index’s development for BNA, said. The revised first quarter reading signals that weak labor market conditions will put further downward pressure on wage increases in the coming months, Kobe said.

In the private sector overall, the annual rate of wage gains likely will decline 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.

Reflecting the weak job market, six of the WTI’s seven components made negative contributions to the revised first quarter reading. One component, average hourly earnings of production and nonsupervisory workers, was essentially unchanged and had a neutral effect on the index. The largest negative contributor was the share of employers planning to hire production and service workers in the coming months, as shown in BNA’s quarterly Employment Outlook Survey.

Contributions of Components

The six negative components of the revised 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 as measured by BLS, was a neutral 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 Wednesday, April 15, 2009 (final 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.