Latest Data Continue to Suggest Slight Acceleration in Wage Gains
Washington, D.C. (February 18, 2005) - The latest data on employment and earnings helped boost the Wage Trend Indicator™ (WTI) in February and continue to suggest that wage gains will pick up slightly in the first half of the year , according to figures released today by BNA, Inc., a Washington, D.C.-based news publisher.
The preliminary WTI reading of 99.14 for the first quarter of 2005 is up from the final reading of 98.93 for the fourth quarter of 2004 (second quarter 1976 = 100).
The WTI has risen for three consecutive quarters, the first time that has happened since 1998, when the index was finishing a string of nine consecutive quarterly increases.
The preliminary reading was boosted by an increase in average hourly earnings data and employers' hiring plans for production and service workers and a reduction in the percentage of unemployed workers who had lost a job.
The index also strengthened on so-called lagged data – the unemployment rate and the level of industrial output from a year ago – that influence wage pressures with a delayed effect. The unemployment rate declined and industrial production rose.
“Nothing here has changed as far as our expectation,” said economist Kathryn Kobe, who helped economist Joel Popkin develop the WTI for BNA. “There's enough information so that we can expect some wage acceleration relatively soon.”
Over its history, the WTI has predicted a turning point in wage trends six to nine months before the trends are apparent in the employment cost index (ECI) compiled by the Labor Department's Bureau of Labor Statistics. A sustained decline in the WTI is predictive of deceleration in the rate of wage increases in the private sector. A sustained increase predicts greater pressure to raise wages.
The most recent ECI report for the fourth quarter of 2004 showed a slight deceleration in the 12-month wage gains for private sector workers to 2.4 percent, from 2.6 percent the previous quarter. However, Kobe said the deceleration was due to a slowdown in wage growth among sales occupations and was likely influenced by commissions. She said the ECI should turn up in the near future.
Contribution of Components
Five components of the WTI made positive contributions to the index. They include: average hourly earnings, the unemployment rate, and job losers as a percentage of the labor force. All are from the monthly BLS employment report. Also making positive contributions were employers' hiring plans for production and service workers, which is derived from the quarterly BNA Employment Outlook Survey, and industrial production, as measured by the Federal Reserve. Expected inflation, as measured by a survey conducted by the Federal Reserve Bank of Philadelphia, was neutral. Data for the other component – employers' difficulty in filling professional and technical jobs, as determined by the quarterly BNA survey – will be available for the revised report on the first quarter WTI to be published in March.
This month's WTI report also contains revisions to historical data based on revised data published recently by BLS and the Federal Reserve.
BNA's Wage Trend Indicator ™ was 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.
More information on the Wage Trend Indicator is available on BNA's home page at: www.wagetrendindicator.com.
