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Stronger U.S. Wage Growth Foreseen
Annual wage and salary growth pegged at close to 2 percent

By Stephen Miller  2/18/2011

The pace of U.S. wage growth in the private sector is expected to accelerate, according to the Bureau of National Affairs' (BNA) preliminary first-quarter Wage Trend Indicator (WTI).

“Labor market conditions are beginning to show some improvements,” said economist Kathryn Kobe, a consultant who maintains and helped develop BNA’s WTI database. “The latest index is signaling a slightly stronger outlook for wage gains,” Kobe said.

The rate of annual wage and salary growth for private-sector workers in the upcoming months is expected to be close to 2 percent, Kobe said. Over the 12 months ended in the fourth quarter of 2010, wages grew 1.8 percent, according to the U.S. Department of Labor’s employment cost index (ECI), up from a 1.3 percent increase in 2009.

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 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.

Contributions of Components

Of the WTI’s seven components, the five positive contributors to the preliminary first-quarter reading were:

Average hourly earnings of production and nonsupervisory workers.

The unemployment rate.

Job losers as a share of the labor force.

Industrial production.

The share of employers planning to hire production and service workers.

The neutral components were the proportion of employers reporting difficulty in filling professional and technical jobs, and economic forecasters’ expectations for the rate of inflation.

The WTI is released in 12 monthly reports per year showing the preliminary, revised and final readings for each quarter, based on emerging economic data.

Stephen Miller, CEBS, is an online editor/manager for SHRM.

Related Articles:

Largest Merit Increases Since Start of Financial Crisis on Tap, SHRM Online Compensation Discipline, February  2011 

2011 Base Salary Increases See Modest Rise, SHRM Online Compensation Discipline, January 2011

2011 Compensation Budgets Stabilizing, SHRM Online Compensation Discipline, December 2010

CFO Survey: Wage Trend Tilts Upward, SHRM Online Compensation Discipline, December 2010

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