The pace of annual wage increases in the private sector likely will remain slow in the coming months, according to the final fourth quarter Wage Trend Indicator (WTI) report released today by Bloomberg BNA, a leading publisher of specialized news and information.
The index fell to 98.41 (second quarter 1976 = 100) from 98.52 in the third quarter. Over the past five quarters, the WTI has fluctuated within a narrow range from 98.40 to 98.67.
"We're still seeing gradual improvement in labor market conditions, which is in line with the slow pace of economic growth," economist Kathryn Kobe, a consultant who helped develop and now maintains Bloomberg BNA's WTI database, said. "The latest WTI suggests there is still too much slack to support most workers' demands for higher wages," Kobe said.
Kobe said she expects little or no change in annual wage gains in the private sector from the 1.8 percent increase over the year ended in the third quarter, as measured by 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 negative contributions to the final fourth quarter reading, while three factors were positive and one was neutral.
Contributions of Components
Among the WTI's seven components, the three negative contributors to the final fourth quarter reading were average hourly earnings of production and nonsupervisory workers, reported by DOL; the share of employers planning to hire production and service workers in the coming months, measured by Bloomberg BNA's quarterly employment outlook survey; and the proportion of employers reporting difficulty in filling professional and technical jobs, also from Bloomberg BNA's employment survey. The three positive factors were forecasters' expectations for the rate of inflation, compiled by the Federal Reserve Bank of Philadelphia; the unemployment rate, from DOL; and job losers as a share of the labor force, also from DOL. The neutral component was industrial production, reported by the Federal Reserve Board.
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