Wage Growth to Improve in Second Half of 2016, WTI Says

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By Larry Swisher

April 19 — The rate of wage growth for most U.S. workers likely will increase in the second half of 2016, the latest Wage Trend Indicator showed April 19.

Bloomberg BNA's index rose to 100.07 in the first quarter from 100.01 in the fourth quarter of 2015, marking its 10th consecutive gain.

“The labor market continues to be relatively good, which is drawing more Americans into the labor force,” economist Kathryn Kobe, a consultant who maintains and helped develop Bloomberg BNA's WTI database, said. “I think there are still discouraged workers who probably will join the labor pool, so that may cause a bit of a drag on the pickup in wage increases.”

Kobe expects the rate of wage growth to improve to between 2.5 percent and 3 percent in the next six to nine months.

The WTI forecasts the direction of wage trends but not the amount of acceleration or slowdown.

Over the year ended in the fourth quarter of 2015, wages and salaries climbed 2.1 percent compared with a 2.2 percent gain over the same period in 2015, the Labor Department reported. In 2007, before the recession, annual increases ranged from 3.3 percent to 3.6 percent.

Most Signs Positive

Reflecting recent economic conditions, five of the WTI's seven components contributed to the index's first-quarter increase, while two had a negative impact.

Helping boost the index were the percentage of employers planning to hire production and service workers in the coming months and the proportion of employers reporting difficulty in filling professional and technical jobs, both as shown in Bloomberg BNA's quarterly employment survey. Also making positive impacts were the unemployment rate, job losers as a share of the labor force, and average hourly earnings of production and nonsupervisory workers, all reported by the DOL.

Acting as drags on the WTI were economic forecasters' expectations for the rate of inflation, compiled by the Federal Reserve Bank of Philadelphia, and industrial production, measured by the Federal Reserve Board.

The preliminary second-quarter index will be released on May 18.

For More Information

For more information, see Compensation and Benefits Library’s Bloomberg BNA's Wage Trend Indicator chapter.

To contact the reporter on this story: Larry Swisher in Washington at lswisher@bna.com

To contact the editor responsible for this story: Susan J. McGolrick at smcgolrick@bna.com