Workers Should Expect Steady Wage Growth

ARLINGTON, Va., July 17, 2013 /PRNewswire-USNewswire/ — Workers in the private sector should expect wages to increase in the coming months at about the same rate as they have in recent years, according to the final second quarter Wage Trend Indicator™ (WTI) released today by Bloomberg BNA, a leading publisher of specialized news and information.

The index for the second quarter stands at 98.72 (second quarter 1976 = 100), virtually unchanged from the first-quarter reading of 98.73. Over the past two years, the WTI has fluctuated within a narrow range from 98.47 to 98.75.

“The labor market is showing signs of slow improvement but has not strengthened enough to cause a pickup in wage growth,” economist Kathryn Kobe, a consultant who maintains and helped develop Bloomberg BNA’s WTI database, said.

Kobe said she expects the annual rate of wage gains in the private sector in the coming months to remain at or near the 1.7 percent increase posted in the first quarter, as measured by the Department of Labor’s employment cost index (ECI). The WTI does not forecast the magnitude of wage growth, only the direction.

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 mixed economic conditions, three of the WTI’s seven components made positive contributions to the final second quarter reading, while three factors were negative and one was neutral.

Contributions of Components

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

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.