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BNA Index Signals Further Weakening in Rate of Wage Growth

NEWS RELEASE

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

Arlington, Va. (Sept. 15, 2009—The annual rate of increase in wages for private sector workers likely will weaken further in the coming months, according to the revised third quarter Wage Trend Indicator™ (WTI) released today by BNA, a leading publisher of specialized news and information.

The index declined for the sixth consecutive quarter to 98.04 (second quarter 1976 = 100) from 98.55 in the second quarter.

“Even though the economy may be turning the corner, the latest WTI is still pointing to further weakening in year-over-year wage gains in the months ahead,” said economist Kathryn Kobe, a consultant who maintains and helped develop BNA’s WTI database. “Increases in unemployment, which are expected to continue, tend to leave most workers who have jobs without a lot of bargaining power,” Kobe said.

Kobe said the annual rate of wage growth in the private sector probably will decline to as little as 1.0 percent or less, which would break the record low of 1.6 percent posted in the second quarter, as shown by the Department of Labor’s employment cost index (ECI).

“I expect gains to be quite small well into next year, certainly through the first quarter of 2010,” she said.

Over its history, the forward-looking 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 revised third quarter reading, while one component was positive, and one 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, according to 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. The only positive factor was the proportion of employers reporting difficulty in filling professional and technical jobs, from BNA’s employment survey, while forecasters’ expectations for the rate of inflation, compiled by the Federal Reserve Bank of Philadelphia, was the neutral component.

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 WTI home page at http://www.wagetrendindicator.com.

The next report of the Wage Trend Indicator™ will be released on Thursday, Oct. 15, 2009 (final 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.