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Preliminary WTI Signals Stability in Wage Increases

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The index declined to 98.48 (second quarter 1976 = 100) from 98.56 in the fourth quarter of 2011, as revised. If confirmed by more complete data in the revised and final first quarter readings, this would be the WTI's first decline in six quarters.

"Although the job market has shown improvement recently, inflation expectations have weakened at least temporarily," economist Kathryn Kobe, a consultant who maintains and helped develop Bloomberg BNA's WTI database, said. "Based on preliminary information, the latest WTI is indicating a stall in the pace of wage growth, but it is premature to call this a turning point," Kobe said.

Over its history, the WTI has predicted a turning point in wage trends six to nine months before the trends are apparent in the Department of Labor's employment cost index (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.

Annual wage increases in the private sector are expected to be close to the 1.6 percent gain in 2011 measured by the ECI.

Reflecting recent labor market conditions, four of the WTI's seven components made negative contributions to the preliminary first quarter reading, while two factors were positive and one was neutral.

This month's WTI report incorporates annual revisions to historical data based on revised component data published recently by BLS and the Federal Reserve.

Contributions of Components

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

Bloomberg BNA's Wage Trend Indicator(TM) 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 Bloomberg BNA's WTI home page at www.wagetrendindicator.com.

The next report of the Wage Trend Indicator(TM) will be released on Thursday, March 15, 2012 (revised first quarter)

Bloomberg BNA, a wholly owned subsidiary of Bloomberg, is a leading source of legal, regulatory, and business information for professionals. Its network of more than 2,500 reporters, correspondents, and leading practitioners delivers expert analysis, news, practice tools, and guidance -- the information that matters most to professionals. Bloomberg BNA's authoritative coverage spans the full range of legal practice areas, including tax & accounting, labor & employment, intellectual property, banking & securities, employee benefits, health care, privacy & data security, human resources, and environment, health & safety. www.bna.com

Dr. Joel Popkin, who is acknowledged as one of the country's foremost authorities on the measurement and analysis of wages and prices, developed the WTI for Bloomberg BNA. Formerly an official with the Bureau of Labor Statistics, Dr. Popkin has been an analyst observing and predicting the U.S. economic outlook for 40 years. Kathryn Kobe, who worked with Popkin in designing the indicator for Bloomberg BNA, is director of price, wage, and productivity analysis at Economic Consulting Services LLC.

To obtain Wage Trend Indicator(TM) reports by e-mail on a regular basis, contact Jerry Walsh, BNA PLUS, 800-372-1033.

SOURCE Bloomberg BNA