Arlington, Va. (Feb. 18, 2009) – The rate of wage increases in the private sector likely will slow further in the coming months, according to the preliminary first quarter Wage Trend Indicator™ (WTI) released today by BNA, a leading publisher of specialized news and information.

The WTI fell to 99.59 (second quarter 1976 = 100), down from the fourth quarter 2008 reading of 100.14. The index has declined steadily over the past year.

“The WTI now has fallen below 100 for the first time since 2005,” said economist Kathryn Kobe, who worked on the index’s development for BNA, said. “Right now, the outlook for the job market is very dismal all the way around,” Kobe said. Lower expectations both for employment and for inflation reduce the pressure on employers to raise wages, she said.
Kobe expects the annual rate of increase in private sector wages later this year to drop below 2.0 percent, which would be the lowest on record since the Department of Labor’s Bureau of Labor Statistics began tracking such figures in 1980. In the fourth quarter of 2008, the most recent data available, the pace of year-over-year wage growth slowed to 2.6 percent from 3.3 percent in the same period of 2007, according to BLS’s employment cost index (ECI).

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.

Consistent with the weak labor market, five of the WTI’s seven components made negative contributions to the preliminary first quarter reading, while one was neutral and one was positive. The largest negative contributor was the share of employers planning to hire production and service workers, as shown in BNA’s quarterly Employment Outlook Survey.

Source: www.bna.com