Average pay raises expected to decline

McClatchy Newspapers

KANSAS CITY, Mo. — With unemployment rising and the available labor pool expanding, don’t expect a sweet raise to kick off 2010.

The average annual pay raise at year-end and to start 2010 most likely will fall below 2 percent.

BNA Inc. said the final second-quarter reading of the Wage Trend Indicator was 98.55, down from 99.35 in the first quarter. The index, based on a reading of 100 for the 1976 second quarter, dropped for the fifth-straight quarter.

It also was the index’s lowest reading since the second quarter of 2004, when the indicator was at 98.28.

BNA’s index compiles and calculates economic data that forecast what the private sector’s annual wage increases will be in the next six to nine months. The actual annual pay raises are calculated by the U.S. Department of Labor’s Employment Cost Index.

Federal statistics showed that the average annual wage increase in the first quarter was 2 percent, an all-time low since the government began tracking pay raises in 1980. The BNA index shows that it will most likely fall below 2 percent in the coming months.

The Labor Department figures showed that the average annual wage increase in 2008 was 2.6 percent.

“The WTI is still pointing to continued deceleration in annual wage increases in the near term,” said economist Kathryn Kobe, who helped develop the index. “Labor market conditions are extremely weak. We’re in a much different employment situation than just a couple of years ago.”

Six of the index’s seven components had a negative impact on the reading. The negatives were a decline in the share of employers planning to hire production and service workers in the coming months, more employers having trouble filling professional and technical jobs, job losers as a percentage of the labor force, the unemployment rate, the average hourly earnings of production and nonsupervisory workers, and industrial production.

A rise in the expectation for inflation was the index’s only positive factor.