Index signals increase in wage gains

RP news wires
Tags: talent management

The rate of private-sector wage increases is expected to pick up in the coming months, according to the revised third quarter Wage Trend Indicator (WTI) released September 15 by BNA, a leading publisher of specialized news and information.

The WTI rose to 97.01 (second quarter 1976 = 100) from 96.85 in the second quarter. If confirmed by the final reading, it would be the index's first gain in more than two years, ending nine straight quarterly declines, dating back to early 2008.

"We're beginning to see some small positive upward movements in employment market conditions, or at least no worsening," said economist Kathryn Kobe, a consultant who maintains and helped develop BNA's WTI database. "This latest WTI is indicating we should see some improvement in the pace of wage gains, likely by the end of the year," Kobe said.

Year-over-year wage and salary increases for private sector employees 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 Department of Labor'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 recent labor market conditions, four of the WTI's seven components made positive contributions to the revised third quarter reading, while two components were negative, and one was neutral.

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

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

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