The (sort of) good news: Despite a lousy economy, base salaries in the U.S. are expected to rise 3.7% this year. The not-so-good news: That's flat versus last year's increase, and it's less than the current inflation rate. In addition, the increase in performance-related compensation is expected to dip this year for the first time since 1993


According to the human resources consulting group Hewitt Associates, this should mark the seventh consecutive year that base salary increases have remained relatively flat. Since 2002, annual increases have settled between 3.4% to 3.7%. From 1992 through 2001, salary increases ranged from between 3.9% to 4.6%.


Hewitt forecasts base salaries to nudge up by 3.8% in 2009.


Variable pay bonuses, or performance-related awards are expected to increase 10.8% this year, down from an 11.8% increase in 2007. Hewitt projects that to dip to a 10.6% increase in 2009. These types of awards include signing bonuses, business incentives, special recognition awards and retention bonuses.


The biggest salary increases this year are forecast for Washington, D.C. (4.3%), along with Denver, Houston, Los Angeles, and New York City (all 4.0%). The lowest increases are expected in Philadelphia and San Francisco (3.5%), followed by Boston, Milwaukee and Minneapolis/St. Paul (all 3.7%).


Hewitt says only 2% of organizations plan to freeze salaries in 2008.


According to the U.S. Bureau of Labor Statistics, the seasonally-adjusted Consumer Price Index in July was 5.49% higher than in the year-earlier period.