Little Change in Pace of Wage Growth Likely, WTI Signals
ARLINGTON, Va., Aug. 15, 2012 /PRNewswire-USNewswire/ -- Annual wage increases for private sector workers likely will hold roughly steady in the coming months, according to the preliminary third quarter Wage Trend Indicator™ (WTI) released today by Bloomberg BNA, a leading publisher of specialized news and information.
The index declined to 98.50 (second quarter 1976 = 100) from 98.67 in the second quarter. Over the past year, the forward-looking indicator has fluctuated in a narrow range from 98.40 to 98.67.
"The latest reading suggests the pace of wage growth will be in a holding pattern through at least the end of 2012," economist Kathryn Kobe, a consultant who maintains and helped develop Bloomberg BNA's WTI database, said. "The impending U.S. budget cliff, the poor situation in Europe, and weak job growth are all impacting confidence in the economy," Kobe said.
Over its history, the WTI has predicted a turning point in wage trends six to nine months before the trends are apparent in the Department of Labor's employment cost index (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.
Kobe said she expects little change in annual wage gains overall in the private sector from the 1.8 percent increase over the year ended in the second quarter, as measured by the ECI. The WTI does not forecast the magnitude of wage growth, only the direction.
Reflecting recent economic conditions, five of the WTI's seven components made negative contributions to the preliminary third quarter reading, while two factors were neutral.
Contributions of Components
Of the WTI's seven components, the five negative contributors to the preliminary third quarter reading were forecasters' expectations for the rate of inflation, compiled by the Federal Reserve Bank of Philadelphia; the unemployment rate, job losers as a share of the labor force, and average hourly earnings of production and nonsupervisory workers, all reported by DOL; and the share of employers planning to hire production and service workers in the coming months, as measured by Bloomberg BNA's quarterly employment outlook survey. The neutral factors were the proportion of employers reporting difficulty in filling professional and technical jobs, from Bloomberg BNA's survey, and industrial production, measured by the Federal Reserve Board.
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, Sept. 18, 2012 (revised third quarter)
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Dr. Joel Popkin, who is acknowledged as one of the country's foremost authorities on the measurement and analysis of wages and prices, developed the WTI for Bloomberg BNA. 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 Bloomberg 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 Research & Custom Solutions, 800-372-1033.
SOURCE Bloomberg BNA