Slow Wage Growth Likely to Continue

Wage labour

Wage labour (Photo credit: Wikipedia)

 

 

 

The slow pace of annual wage increases in the private sector likely will continue in the coming months, according to the revised third-quarter Wage Trend Indicator™ (WTI) released today by Bloomberg BNA, a leading publisher of specialized news and information.

 

 

The index declined in the third quarter to 98.70 (second quarter 1976 = 100) from 98.72 in the second quarter. Since the third quarter of 2011, the WTI has fluctuated within a narrow range from 98.47 to 98.75.

 

 

“Although we are continuing to see slow but steady job growth, there is still a very large pool of unemployed workers, which tends to lower the pressure on employers to raise wages,” 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 1.9 percent increase posted in the second quarter, according to 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 revised third quarter reading, while four factors were negative.

 

 

Contributions of Components

 

 

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

 

 

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.

 

 

 

 

 

From: Bloomberg BNA

 

 

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