BNA Index Signals Small Gain in Rate of Wage Increases

The annual rate of increase in wages for private sector workers likely will increase slightly in the coming months, according to the final third quarter Wage Trend Indicator™ (WTI) released today by BNA, a leading publisher of specialized news and information.

In the third quarter, the WTI increased for the first time in more than two years, to 97.00 (second quarter 1976 = 100) from 96.85 in the second quarter. The increase follows a recession-driven stretch of nine quarterly declines.

"It's pretty safe to say that this index reading indicates we've hit bottom," said Kathryn Kobe, a consultant who maintains and helped develop BNA's WTI database. "It's likely that we'll see some small gains in wage increases over the next five or six months, but the employment picture is still very mixed. A large overhang of unemployed people will keep wage increases small, as well as employers' slow pace in adding jobs to payrolls."

Year-over-year wage and salary increases for private sector workers in the coming months are expected to equal or exceed the 1.6 percent recorded over the 12 months ended in June, as measured by the Labor Department's employment cost index (ECI). During the past year, the rate of annual wage growth has ranged from a record low of 1.4 percent to 1.6 percent.

Reflecting current labor market conditions, four of the WTI's seven components made positive contributions to the final third quarter reading, while the remaining three components were negative.

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

Of the WTI's seven components, the four positive components in the final third quarter reading were average hourly earnings of production and nonsupervisory workers, as measured by DOL; industrial production, measured by the Federal Reserve Board; the share of employers planning to hire production and service workers in the coming months and the share of employers reporting difficulty in filling professional and technical jobs, both tracked by BNA's employment outlook survey. The three negative contributors were economic forecasters' expectations for the rate of inflation, compiled by the Federal Reserve Bank of Philadelphia, and job losers as a share of the labor force and the unemployment rate, both tracked by DOL.

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, Nov. 18, 2010 (preliminary fourth 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.