Wage Growth to Accelerate in 2014, WTI Forecasts

Arlington, Va. (Feb. 19, 2014) 
— Wage growth in private industry is expected to accelerate later this year, according to the preliminary first-quarter Wage Trend Indicator™ (WTI) released today by Bloomberg BNA, a leading publisher of specialized news and information.

The index rose to 98.87 (second quarter 1976 = 100) from 98.77 in the fourth quarter of 2013, marking its second consecutive quarterly gain.

“We’re still seeing steady but modest improvements in the labor market, which removes some workers from the large pool of unemployed,” economist Kathryn Kobe, a consultant who maintains and helped develop Bloomberg BNA’s WTI database, said. In addition, more employers are planning to make increases to their workforces, she said.

Kobe said she expects year-over-year wage growth in the private sector to rise slightly above 2.1 percent later in 2014. That was the gain recently reported by the Labor Department for 2013, according to the employment cost index (ECI). The WTI forecasts whether the rate of wage growth is accelerating or decelerating, but not the amount of the change.

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 increase in the WTI forecasts greater pressure to raise private sector wages, while a sustained decline is predictive of a deceleration in the rate of wage increases.

Reflecting recent economic conditions, four of the WTI’s seven components made positive contributions to the preliminary first-quarter reading, while one factor was negative, and two were neutral.

This month's WTI report incorporates annual revisions to historical data based on revised component data published recently by DOL and the Federal Reserve.

Contributions of Components  

Among the WTI’s seven components, the four positive contributors to the preliminary first-quarter reading were the unemployment rate and job losers as a share of the labor force, both measured by DOL; forecasters’ expectations for the rate of inflation, compiled by the Federal Reserve Bank of Philadelphia; and the share of employers planning to hire production and service workers in the coming months, taken from Bloomberg BNA’s quarterly employment outlook survey. The negative factor was industrial production, reported by the Federal Reserve Board. The neutral components were average hourly earnings of production and nonsupervisory workers, from DOL, and the share of employers reporting difficulty in filling professional and technical jobs, as shown in Bloomberg BNA’s survey.

Bloomberg 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 Bloomberg BNA's WTI home page at http://www.bna.com/wage-trend-indicator-p12884902670/.

The next report of the Wage Trend Indicator™ will be released on

Tuesday, March 18, 2014 (revised first quarter)