Holding Pattern for Wage Growth to Continue

Arlington, Va. — Nov. 15

Little or no change in the pace of annual wage increases in the private sector is expected in the coming months, according to the preliminary fourth quarter Wage Trend Indicator (WTI) by Bloomberg BNA, a publisher of specialized news and information.

The index edged down to 98.47 from 98.52 in the third quarter. If confirmed by the revised and final fourth quarter readings, the decline would be the second in a row. Over the past five quarters, the WTI has fluctuated within a narrow range from 98.40 to 98.67.

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, two of the WTI’s seven components made negative contributions to the preliminary fourth quarter reading that outweighed three positive factors, while two components were neutral.

Of the WTI’s seven components, the two negative contributors to the preliminary fourth quarter reading were average hourly earnings of production and nonsupervisory workers, as reported by the Department of Labor (DOL), and the share of employers planning to hire production and service workers in the coming months, as measured by Bloomberg BNA’s quarterly employment outlook survey.

The positive factors were forecasters’ expectations for the rate of inflation, compiled by the Federal Reserve Bank of Philadelphia, and the unemployment rate and job losers as a share of the labor force, both from DOL.

The neutral components were the proportion of employers reporting difficulty in filling professional and technical jobs, from Bloomberg BNA’s employment outlook survey, and industrial production, reported by the Federal Reserve Board.

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 aims to provide timely information for business and human resource analysts and executives as they plan for year-to-year changes in compensation costs.

Source: Bloomberg BNA