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For release 10:00 a.m. (ET) Thursday, March 21, 2024 USDL-24-0546 Technical information: (202) 691-5606 • Productivity@bls.gov • www.bls.gov/productivity Media contact: (202) 691-5902 • PressOffice@bls.gov TOTAL FACTOR PRODUCTIVITY – 2023 Total factor productivity (TFP) in the private nonfarm business sector increased 0.7 percent in 2023, the U.S. Bureau of Labor Statistics reported today. (See table A.) The 2023 increase in TFP reflects a 2.6-percent increase in output and a 1.9-percent increase in the combined inputs of capital and labor. Capital input grew by 2.8 percent and labor input–which is the combined effect of hours worked and labor composition–increased by 1.2 percent. The 2023 growth in TFP is in close range with the average annual growth experienced in the pre-pandemic 2011-19 period. ------------------------------------------------------------------------------ |NAICS and Index Changes | |All industry series have been updated to reflect industry definition | |consistent with the 2017 North American Industry Classification System | |(NAICS). All indexes are rebased to 2017=100 to reflect the new definitions.| ------------------------------------------------------------------------------ Total factor productivity is calculated by dividing an index of real output by an index of combined units of labor input and capital input. Total factor productivity annual measures differ from BLS quarterly labor productivity (output per hour worked) measures because TFP includes the influences of capital input and shifts in the composition of workers. Measures for the most recent year of this release are preliminary estimates. See the Technical Notes for additional information. Private business sector total factor productivity also increased 0.7 percent in 2023, as output increased 2.6 percent and combined inputs increased 1.9 percent. (See table A.) Total Factor Productivity Trends: 2019-23 The 0.7-percent growth in TFP in the private nonfarm business sector in 2023 resulted from the growth in output outpacing the growth in combined inputs. The growth of these three measures shows a similar pattern to growth experienced in 2019. Combined input growth is made up of growth in three components: capital input, hours worked, and labor composition. Capital input growth continued to accelerate since the 2.3-percent growth experienced in 2021, growing 2.8 percent in both 2022 and 2023. Hours worked decelerated from the robust 2021 growth of 5.9 percent, continuing to slow from the 4.1-percent growth in 2022 to 1.3-percent growth in 2023. Labor composition decreased 0.1 percent in 2023, but the level of the labor input index has remained consistent above pre-pandemic levels. Total Factor Productivity Trends – 1987-2023 Productivity is often best viewed as a long-run measure. TFP grew 0.5 percent per year in the private nonfarm business sector in the current 2019-23 business cycle, the same growth as the previous 2007-19 cycle. However, the growth in both these periods is below the long-run 1987-2023 annual growth of 0.8 percent. (See table A.) The growth in output and combined inputs follow a similar trend, with growth in the current 2019-23 business cycle below their long-run averages. (See table A). Labor Productivity Trends Labor productivity growth is the approximate sum of three components: total factor productivity growth, the contribution of capital intensity, and the contribution of shifts in the composition of labor. In 2023, private nonfarm business labor productivity increased 1.3 percent, a rate slower than the 1.6-percent annual growth over the current business cycle, 2019-23 (See table B.) The 2023 private nonfarm business sector growth in labor productivity was a result of the 0.7-percent increase in total factor productivity, and a 0.6-percent increase in the contribution of capital intensity to labor productivity growth. Capital intensity is the ratio of capital input growth to labor hours growth. The 2023 increase in capital intensity was driven by the growth in capital input of 2.8 percent outpacing hours worked growth of 1.3 percent. (See tables A and B.) The contribution of labor composition to labor productivity for private nonfarm business was unchanged in 2023. Labor composition estimates the effect of shifts in the age, education, and gender composition of the workforce on hours worked. Over the 2019-23 business cycle, the annual contribution to labor productivity growth from labor composition was 0.3 percent. Detailed Capital Input Trends 2022 Capital input in the private nonfarm business sector increased at an annual rate of 2.8 percent in 2022, the latest year of detailed capital data. The 2022 capital input growth accelerated 0.5 percentage point (see table C) from the 2021 annual rate of 2.3 percent. The 2022 capital input growth was driven by the 7.6-percent growth in intellectual property products, the largest growth in this asset category since 2001. Capital input is made up of different types of capital assets, including equipment, structures, and intellectual property products. The contributions of various asset types to capital input growth over prior business cycles highlights the shift from equipment assets to intellectual property products over the last 30 years. Capital input growth peaked in the 1990-2000 business cycle driven by the contributions of equipment and intellectual property products, which consist of software, research and development, and artistic originals assets. However, the contributions from equipment slowed dramatically over the next two business cycles, leading to capital input growth of 2.4 percent per year in the 2007-19 business cycle, half of the annual 4.7-percent growth peak during 1990-2000. Equipment’s contribution to capital growth continued to slow in the current 2019-22 business cycle but was offset by a large increased contribution from intellectual property products. Underlying asset detail within the equipment and intellectual property product asset types allow for examination of the shift from equipment to intellectual property products. The equipment asset type can be further broken down into information processing equipment, motor vehicles including autos, light trucks, and other vehicles, and all other equipment. The contributions of information processing equipment, which includes communication equipment, computers, and other information asset types, contributed 1.6 percentage points to capital input annual growth of 4.7 percent during the 1990-2000 business cycle. However, in the current 2019-22 period, these assets only contributed 0.5 percentage points. Within intellectual property products, research and development (R&D) is the main contributing asset for all time periods. In the 2019-22 period the increased contributions of R&D and pre-packaged software led to the increased contribution of intellectual property products.