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Most Workers Likely to See Smaller Pay Increases, BNA Index Forecasts

NEWS RELEASE

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

Arlington, Va. (May 19, 2009) – The slowdown in the pace of wage growth in the private sector likely will continue later this year and may extend into 2010, suggests the preliminary second quarter Wage Trend Indicator™ (WTI) released today by BNA.

The WTI declined for the fifth straight quarter to 98.72 (second quarter 1976 = 100) from 99.35 in the first quarter, according to BNA, a leading publisher of specialized news and information.

“The latest WTI shows further weakening of most workers’ ability to bargain for higher wages,” said Kathryn Kobe, an economist who worked on the index’s development for BNA. "Businesses are under financial pressure and are going to be less generous about pay increases overall, and there are reports of some employees receiving pay cuts,” Kobe said.

“There are no bright spots in the labor market,” Joel Popkin, who developed the index for BNA, said. “The preliminary second quarter WTI suggests that wage growth rates will continue to edge down later this year and probably into early 2010,” Popkin said.

Annual wage gains in the private sector as a whole are expected to fall below the 2.0 percent year-over-year gain posted in the first quarter, the lowest on record since the Department of Labor’s Bureau of Labor Statistics began tracking such figures in 1980. That was down from a 2.6 percent increase in 2008, 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.

Contributions of Components

Reflecting the economic downturn, five of the WTI’s seven components made negative contributions to the preliminary second quarter reading, while one component was positive and another did not change and had a neutral impact. The negative factors were a decline in the share of employers planning to hire production and service workers in the coming months, as shown in 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 from DOL’s monthly employment report; 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. The neutral component was the proportion of employers reporting difficulty in filling professional and technical jobs, from BNA’s 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, June 16, 2009 (revised second 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.