Slowdown in Wage Increases to Continue, BNA Index Predicts

ARLINGTON, Va., March 17 /PRNewswire-USNewswire/ -- Annual wage increases in the private sector likely will continue to slow 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.

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The WTI fell to 97.14 (second quarter 1976 = 100) from 97.42 in the fourth quarter of 2009. The index has fallen steadily for the past two years.

"Although the latest index reading was revised slightly upward from its preliminary level, it's still down from the previous quarter," said Kathryn Kobe, an economic consultant who maintains and helped develop BNA's WTI database. "The fact that the index is still lower than where it was two years ago indicates that wage growth will continue to be slow," Kobe said.

Annual wage gains in the private sector overall are expected to remain at or below the 1.4 percent posted in 2009, as shown in the Department of Labor's most recent employment cost index (ECI) data. That was a record low and down significantly from the 2.4 percent increase in 2008.

Reflecting mixed economic conditions, three of the WTI's seven components made negative contributions to the preliminary first quarter reading, while four components were positive. "We're beginning to see a mix of positive and negative components," Kobe said. "This probably indicates that the index is nearing its bottom for this business cycle. But that doesn't mean it might not stay at the bottom for several months, since wage growth depends on overall economic growth and job creation."

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

Of the WTI's seven components, the three negative contributions to the revised first quarter reading were the unemployment rate and average hourly earnings of production and nonsupervisory workers, both reported by DOL, and industrial production, measured by the Federal Reserve Board. The four positive components were job losers as a share of the labor force, from DOL; economic forecasters' expectations for the rate of inflation, compiled by the Federal Reserve Bank of Philadelphia; the share of employers planning to hire production and service workers in the coming months, tracked by BNA's quarterly Employment Outlook Survey; and the proportion of employers reporting difficulty in filling professional and technical jobs, also 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 WTI home page at http://www.wagetrendindicator.com.

The next report of the Wage Trend Indicator™ will be released on Wednesday, April 14, 2010 (final first quarter).

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.

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SOURCE BNA

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