Upward pressure on wages to follow: BNA Index

Workers in the private sector overall likely will see higher annual wage increases in the coming months, according to the revised first quarter Wage Trend Indicator (WTI) released by BNA.

The WTI stands at 97.99, up from 97.42 in the fourth quarter of 2010, marking the forward-looking indicator's third consecutive gain, BNA said.

For the most part, the employment situation has stabilized and is getting a little stronger, said economist Kathryn Kobe, who helped develop BNA's WTI database. The latest WTI reading shows some upward pressure on wages is expected to follow.

The rate of annual wage and salary growth for private sector workers in the coming months likely will be close to 2.0 percent, Kobe said. Over the 12 months ended in the fourth quarter, wages grew 1.8 percent, according to the Department of Labor's employment cost index (ECI), up from a 1.3 percent increase in 2009.

Reflecting the improving labor market, five of the WTI's seven components made positive contributions to the revised first quarter reading, while one factor was negative and one other was neutral, BNA said.

BNA said the five positive contributors to the revised first quarter reading were average hourly earnings of production and nonsupervisory workers, the unemployment rate, and job losers as a share of the labor force, industrial production, and the share of employers planning to hire production and service workers in the coming months.

The only negative factor was the proportion of employers reporting difficulty in filling professional and technical jobs.

The final WTI component - economic forecasters' expectations for the rate of inflation, compiled by the Federal Reserve Bank of Philadelphia - was neutral.

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.