Little Improvement in Wage Gains Likely

Arlington, Va. — May 15

Private sector workers are likely to see little or no improvement in the overall pace of annual wage increases in the coming months, according to the preliminary second quarter Wage Trend Indicator (WTI) released Wednesday by Bloomberg BNA, a publisher of financial news and information.

The index declined to 98.68 in the second quarter from 98.73 in the first quarter. During the past two years, the WTI has remained within a narrow range, fluctuating up and down from 98.47 to 98.75.

During its history, the WTI has predicted a turning point in wage trends six to nine months before the trends are apparent in other economic measures. 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 preliminary second quarter reading, while three factors were negative and one was neutral.

Among the WTI’s seven components, the three positive contributors to the preliminary second quarter reading were job losers as a share of the labor force and the unemployment rate, both from U.S. Department of Labor; 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 the Department of Labor; 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 neutral component was the share of employers reporting difficulty in filling professional and technical jobs, also from Bloomberg BNA’s employment survey.

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