In the upcoming months, no significant changes are expected regarding the pace of annual wage growth, according to the preliminary fourth-quarter Wage Trend Indicator released by Bloomberg BNA, a publisher of specialized news and information.
The index took a slip dip from 98.52 to 98.47 in the third quarter. If this figure is confirmed in the revised and final fourth-quarter readings, it would mark the second consecutive drop. The index has barely moved between 98.40 and 98.67 over the last five quarters.
"The latest WTI suggests that wage growth is still in a holding pattern," says economist Kathryn Kobe, a consultant who maintains and helped develop Bloomberg BNA's WTI database. "The labor market has been moving in the right direction, but there is a lot of uncertainty over efforts to avoid the fiscal cliff, which would send the economy into a tailspin."
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From the 1.8 percent increase over the year ended in the third quarter, little or no change is projected for annual wage growth among the private sector, Kobe says. While the index does not forecast the magnitude of wage growth, it does predict the direction.
Since the index has measured salary growth, it has predicted a turning point for compensation movements six to nine months before they appear in the Employment Cost Index by the Bureau of Labor Statistics. Continued growth in the index suggests there is more pressure to increase private-sector raises, but a sustained decline suggests wage increases will slow down.
Among the index's seven components, two are negative: average hourly earnings of production and nonsupervisory workers and the share of employers planning to hire production and service workers in the near future. The three positive factors are forecasters' expectations for the inflation rate, the unemployment rate and job losers as a share of the labor force while the neutral components are the number of employers facing troubles filling professional and technical jobs and industrial production.
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