Multifactor Productivity Trends in Manufacturing News Release

For release 10:00 a.m. (EST) Thursday, November 18, 2010	USDL-10-1603
Technical information:	(202) 691-5606  •  mfpweb@bls.gov  •  www.bls.gov/mfp
Media contact:	        (202) 691-5902  •  PressOffice@bls.gov


MULTIFACTOR PRODUCTIVITY TRENDS IN MANUFACTURING - 2008


Manufacturing sector multifactor productivity decreased at a 0.7 percent annual
rate in 2008, the U.S. Bureau of Labor Statistics reported today. 
(See chart 1.)  This was the largest annual decline in multifactor productivity
since 2001. (See table 1.)  Multifactor productivity measures the change in 
output per unit of combined inputs.  Multifactor productivity is designed to 
measure the joint influences on economic growth of technological change, 
efficiency improvements, returns to scale, reallocation of resources, and other
factors, allowing for the effects of capital, labor and, in the case of the
manufacturing sector, intermediate inputs (energy, materials, purchased 
business services).  Multifactor productivity, therefore, differs from labor 
productivity (output per hour worked) measures that are published quarterly 
by BLS since it includes information on capital services and other data that 
are not available on a quarterly basis.

Durable manufacturing sector multifactor productivity grew 0.3 percent in 2008,
after increasing 4.9 percent in 2007.  Nondurable manufacturing sector 
multifactor productivity fell 1.6 percent in 2008, following a 4.6 percent 
increase in 2007.

Historical trends in manufacturing

Multifactor productivity in manufacturing grew 1.6 percent annually between 
1987 (the starting point of the series) and 2008.  Sectoral output increased 
at a 2.2 percent annual rate over the period and combined inputs rose an 
average of 0.6 percent per year.  Output per hour (labor productivity) grew 
3.5 percent.  For the 2000-2007 period, multifactor productivity in 
manufacturing rose more rapidly than in previous periods, averaging 2.6 percent
per year, outpacing the 2.1 percent growth rate in the 1995-2000 period. 
(See table A.) 

Of the 3.5 percent growth rate in labor productivity in the 1987-2008 period, 
1.6 percent can be attributed to increases in multifactor productivity, 0.6 
percent to the contribution of capital intensity, 0.1 percent to energy 
intensity, 0.8 percent to materials intensity, and 0.4 percent to purchased 
business services intensity.  Multifactor productivity, the contribution of 
intermediate inputs, and the contribution of capital intensity may not sum to
output per hour due to independent rounding. (See table B.)

Fewer industries recorded multifactor productivity, output, and combined input 
increases in 2008 than in any other year since 2001.  Of the 18 industries that
comprise the manufacturing sector, fewer industries each year experienced 
growth in output and combined inputs from 2005 to 2008. (See chart 2.)
 
Revised measures

Previous and revised productivity measures and related data for 2006 and 2007
for the manufacturing, durable goods manufacturing, and nondurable goods 
manufacturing sectors are displayed in table C.  In 2007, multifactor 
productivity growth was revised upward to 5.1 percent from 4.7 percent in the 
manufacturing sector.  Multifactor productivity was also revised upward to 4.6
percent from 3.0 percent in the nondurable manufacturing sector but revised 
downward to 4.9 percent from 6.0 percent in the durable manufacturing sector.  
The revisions in both years were due to comprehensive revisions in source data 
in the revised National Income and Products (NIPA) data released by the 
Bureau of Economic Analysis (BEA) on July 31, 2009.

 
Table A.  Compound annual growth rates for productivity, sectoral output, and 
inputs in the manufacturing sector for selected periods, 1987 to 2008

In percent						
 	            1987-2008 1987-1990 1990-1995 1995-2000 2000-2007 2007-2008
						
Productivity						
   Multifactor 
   productivity1	1.6	 0.2	   1.2	     2.1       2.6	-0.7
   Output per hour  
   of all persons	3.5	 1.8	   3.4	     4.8       3.9	-0.3
   Output per unit 
   of capital services	0.0	-0.1	   0.6	     0.7      -0.1	-5.4
   						
Sectoral Output	        2.2	 2.1	   3.3	     4.7       0.7	-4.4

Inputs
						
   Combined inputs2	0.6	 1.9	   2.1	     2.5      -1.8	-3.7
      Hours3	       -1.2	 0.4	  -0.1	    -0.1      -3.1	-4.0
      Capital services  2.2	 2.3	   2.7	     4.0       0.8	 1.1
      Energy	        0.5	 1.8	   1.6	     5.8      -3.8	-2.6
      Non-energy 
      materials         1.4	 1.7	   3.6	     5.5      -2.2	-5.3
      Purchased business  
      services	        1.1	 5.2	   3.2	     0.6      -0.9	-5.4
						
1Output per unit of combined hours, capital services, energy, materials, 
and purchased business services inputs.
2The growth rate of each input is weighted by its share of current dollar 
costs.
3Hours at work of all persons. 

Table B.  Compound annual growth rates in output per hour of all persons and
contributions of capital intensity, intermediate inputs intensity, and 
multifactor productivity in the manufacturing sector for selected periods, 
1987-2008

In percent						
	            1987-2008 1987-1990 1990-1995 1995-2000 2000-2007 2007-2008
Manufacturing						
						
Output per hour 
of all persons	          3.5	   1.8	    3.4       4.8	3.9	-0.3
						
Contribution of 
capital intensity1	  0.6	   0.3	    0.4       0.7	0.7	 1.0
						
      Contribution of 
      information 
      processing
      equipment 
      and software2	  0.2	   0.2	    0.2       0.4	0.2	 0.3
						
      Contribution
      of all
      other capital
      services            0.3	   0.1	    0.2       0.3	0.5	 0.8

Contribution of 
intermediate inputs3	  1.2	   1.3	    1.7       1.9	0.6	-0.6

      Contribution 
      of energy      
      intensity4	  0.1	   0.0	    0.0       0.2	0.0	 0.1
						
      Contribution 
      of materials    
      intensity5	  0.8	   0.4	    1.1       1.6	0.2	-0.4
						
      Contribution 
      of purchased   
      business 
      services 
      intensity6	  0.4	   0.8	    0.6       0.1	0.4	-0.2
						
Multifactor 
productivity7	          1.6	   0.2	    1.2       2.1	2.6	-0.7
						
1Growth rate in capital services per hour multiplied by capital's share of 
current dollar costs.
2Growth rate of information processing equipment and software per hour 
multiplied by its share of total current dollar costs.
3Growth rate in intermediate inputs per hour multiplied by intermediate inputs 
share of current dollar costs.
4Growth rate in energy services per hour multiplied by energy’s share of 
current dollar costs.
5Growth rate in materials services per hour multiplied by materials’ share of
current dollar costs.
6Growth rate in business services per hour multiplied by business services’
share of current dollar costs.
7 Output per unit of combined hours, capital services, energy, materials, and 
business services inputs.

Table C.  Previous and revised productivity and related measures for the 
2006-2007 and 2005-2006 periods
                                                  Inputs
                                                                       Purc-
                       Multi-   Sect- Com-         Cap-	 	       hased 
                       factor   oral  bined        ital                busi- 
                       Product- out-  In-          Serv-        Mater- ness
Sector                 ivity1   put   puts2 Hours3 ices  Energy ials   services
Annual percent change, 
2006-2007
Manufacturing								
Previous	          4.7	 1.6   -3.0   -1.7   0.5   -2.7	  -8.1	 -0.3
Revised	                  5.1	 2.4   -2.5   -1.7   1.2    6.0	  -7.2	 -0.8
Durable manufacturing							
Previous	          6.0	 2.1   -3.7   -2.1   0.6   -3.8	 -11.1	  0.2
Revised	                  4.9	 3.5   -1.3   -2.1   0.8    8.6	  -4.8	  2.2
Nondurable manufacturing						
Previous	          3.0	 1.1   -1.8   -1.1   0.4   -2.0	  -3.5	 -0.9
Revised	                  4.6	 1.3   -3.2   -1.0   1.4    4.3	  -6.4	 -4.7
								
Annual percent change, 
2005-2006
Manufacturing								
Previous                  2.5	 1.6   -0.9    0.7   0.5   -6.7	  -2.5	 -1.2
Revised	                  2.3	 1.5   -0.7    0.7   0.9   -7.8	  -1.7	 -1.6
Durable manufacturing		 				
Previous                  4.2	 3.1   -1.0    1.1   0.4   -7.5	  -4.0	 -0.9
Revised	                  3.2	 3.1   -0.1    1.1   1.0   -5.0	  -1.4	 -0.4
Nondurable manufacturing						
Previous   	          0.6	-0.1   -0.6    0.1   0.6   -6.3	  -0.5	 -1.5
Revised	                  1.1	-0.1   -1.2    0.0   0.8   -9.6	  -1.2	 -3.1
								
1Output per unit of combined hours, capital services, energy, materials, and 
purchased business services inputs.
2The growth rate of each input is weighted by its share of current dollar 
costs.
3Hours at work of all persons.


TECHNICAL NOTES

Capital Services: Capital services are the services derived from the stock of 
physical assets and software.  Capital services asset detail consists of 44 
types of equipment, 28 types of structures, 3 categories of inventory, and 
land.  The aggregate capital services measures are obtained by Tornqvist 
aggregation of the capital stocks for each asset type within each of the 
eighteen manufacturing NAICS industry groupings using estimated rental prices
for each asset type.  Each rental price reflects the nominal rate of return 
to all assets within the industry and rates of economic depreciation and 
revaluation for the specific asset; rental prices are adjusted for the effects
of taxes.  Data on investments in physical assets and software are obtained 
from Bureau of Economic Analysis (BEA).  Nonfarm industry detail for land is 
based on IRS book value data.  

Labor Hours: The construction of the hours measures follows the methods used 
in the private business sector described in USDL 10-1171, Multifactor 
Productivity Trends, 2008, http://www.bls.gov/news.release/pdf/prod3.pdf , 
except that hours in manufacturing are directly aggregated and do not include
the effects of labor composition.  Hours data for the manufacturing multifactor
productivity measures include hours for all persons working in the 
manufacturing sector – wage and salary workers, the self-employed and unpaid 
family workers.  The primary source of hours data is the BLS Current Employment
Statistics (CES) survey.  Hours paid of production workers are also obtained 
primarily from the CES survey.  The hours of these employees are then converted
to an at-work basis by using information from the Employment Cost Index (ECI) 
of the National Compensation Survey (NCS) and the BLS Hours at Work Survey.  
Hours at work for nonproduction workers are derived using data from the Current
Population Survey (CPS), the CES, and the NCS.  The hours at work of 
proprietors are derived from the CPS.  
Hours at work data are based on underlying hours data published in the June 3, 
2010, Productivity and Costs news release.  Therefore, the data reflect the 
benchmark revisions to the CES and other revisions to hours released on 
February 5, 2010.  Data in this release do not reflect the comprehensive 
revision to the National Income and Product Accounts (NIPA) released by the 
Bureau of Economic Analysis of the U.S. Department of Commerce on July 30, 
2010.  

Intermediate Inputs: In manufacturing, intermediate inputs are energy, 
materials, and purchased business services, and represent a large share of 
production costs.  Research has shown that substitution among inputs, 
including intermediate inputs, affects productivity change.  Therefore, it 
is important to account for intermediate inputs in productivity measures at 
the level of manufacturing.  In contrast, the more aggregate productivity 
measures compare "value-added" output with two classes of inputs, capital and
labor.  Because of these differences in concepts and methodology, productivity
change in manufacturing cannot be directly compared with changes in private 
business or private nonfarm business.  
Data on intermediate inputs are obtained from BEA based on BEA annual 
input-output tables.  Tornqvist indexes of each of these three input classes 
are derived at the 3-digit NAICS level and then aggregated to total 
manufacturing.  Materials inputs are adjusted to exclude transactions between
establishments within the same sector.

Combined Inputs: The five input indexes (capital services, hours, energy, 
materials, and purchased business services) are combined using Tornqvist 
aggregation, employing weights that represent each component's share of total 
costs.  Total costs are defined as the value of manufacturing sectoral output.  

Sectoral Output: The output concept used for multifactor productivity in 
manufacturing is “sectoral output”.   Sectoral output equals gross output 
(sales, receipts, and other operating income, plus commodity taxes plus changes 
in inventories), excluding transactions between establishments within the same 
sector. In contrast, the output concept used for private business and nonfarm 
business is “real value added”.  Real value added output in private business 
equals gross domestic product in the economy less general government, 
government enterprises, private households (including the rental value of 
owner-occupied real estate), and non-profit institutions.  Real value added 
output excludes intermediate transactions between businesses.
The output index for manufacturing is computed using a chained superlative 
index (Tornqvist) of three-digit NAICS industry outputs.   Industry output is 
measured as sectoral output, the total value of goods and services leaving the 
industry. Wherever possible, the indexes of industry output are calculated with
a Tornqvist formula. This formula aggregates the growth rates of the various 
industry outputs between two periods, using their relative shares in industry 
value of production averaged over the two periods as weights.  Industry output 
measures for manufacturing industries are constructed using data from the 
economic censuses and annual surveys of the Bureau of the Census, U.S. 
Department of Commerce, together with information on price changes, primarily
from BLS. 

Multifactor Productivity: The manufacturing multifactor productivity measures
describe the relationship between output in real terms and the inputs involved
in its production.  Manufacturing multifactor productivity measures exclude 
intermediate inputs between manufacturing establishments from both output and 
inputs.  Multifactor productivity does not measure the specific contributions 
of labor, capital, or any other factor of production.  Rather, multifactor 
productivity is designed to measure the joint influences on economic growth 
of technological change, efficiency improvements, returns to scale, 
reallocation of resources due to shifts in factor inputs across industries, 
and other factors.  The multifactor productivity indexes are derived by 
dividing an output index by an index of the combined inputs of labor, capital
services, energy, non-energy materials, and purchased business services.  

Other information: Comprehensive tables containing more detailed data than 
that which is published in this press release are available upon request at 
202-691-5606 or at http://www.bls.gov/mfp/mprdload.htm .  More detailed 
information on methods, limitations, and data sources of capital and labor are
provided in BLS Bulletin 2178 (September 1983), Trends in Multifactor 
Productivity, 1948-81 and on the BLS Multifactor Productivity website under 
the title “Technical Information About the BLS Multifactor Productivity 
Measures” for Major Sectors and 18 NAICS 3-digit Manufacturing Industries at
http://www.bls.gov/mfp/mprtech.pdf.  Methods for measuring manufacturing 
multifactor productivity are discussed in "Measurement of productivity growth
in U.S. manufacturing” in the July 1995 issue of the Monthly Labor Review.  
See http://www.bls.gov/mfp/mprgul95.pdf.  


Table 1.  Manufacturing sector: Productivity and related measures, 1988-2008			
										
Annual percent change from previous year							
      
      Productivity	 	           Inputs
	
      Output  Output                                           Purc-    Comb-  
      per     per     Multi-   Sect-	   Cap-	 	       hased    ined
      hour    unit    factor   oral        ital                busi-    units 
      of all  of      Product- out-	   Serv-        Mater- ness     of all    
Year  persons capital ivity1   put  Hours2 ices  Energy ials   services inputs3  
										
1988	2.1    3.4     1.8     5.2    3.0   1.7	   4.3	  1.4	 8.9	 3.3
1989	1.0   -0.6    -0.5     1.7    0.6   2.3	  -0.5	  2.2	 5.7	 2.2
1990	2.2   -3.0    -0.7    -0.3   -2.5   2.7	   1.8	  1.6	 1.3	 0.4
1991	2.6   -4.0    -0.4    -1.7   -4.2   2.4	  -0.3	 -0.4	-1.0	-1.4
1992	3.8    0.9    -0.7     3.3   -0.5   2.4	  -1.0	  8.7	 7.5	 4.0
1993	2.5    1.4     2.6     3.9    1.3   2.5	   3.3	  0.6	 0.8	 1.3
1994	3.5    3.2     2.7     5.9    2.3   2.7	   3.5	  4.0	 3.8	 3.2
1995	4.5    1.5     1.8     5.2    0.7   3.6	   2.6	  5.3	 4.9	 3.4
1996	3.6   -0.6     0.4     3.4   -0.2   4.0	  -2.7	  8.8	-0.5	 3.0
1997	5.5    2.9     2.8     7.4    1.8   4.4	  -2.1	  8.0	 4.1	 4.4
1998	5.5    0.5     2.6     5.3   -0.3   4.7	   3.3	  6.4	-0.3	 2.6
1999	4.9    0.4     1.2     4.2   -0.7   3.8	  23.3	  6.3	 1.0	 3.0
2000	4.4    0.1     3.6     3.1   -1.3   3.0	   9.1	 -1.9	-1.3	-0.5
2001	1.9   -6.2    -1.1    -4.8   -6.5   1.6	   9.3	 -6.3	-1.7	-3.7
2002	7.3   -1.3     3.2    -0.3   -7.1   1.0	 -22.6	  1.0	-3.2	-3.4
2003	6.3    0.6     3.6     1.1   -4.9   0.4	 -10.7	 -1.7	-0.6	-2.4
2004	2.3    2.0     3.7     1.7   -0.5  -0.3	  -6.3	 -0.8	-6.4	-1.9
2005	4.7    2.9     1.4     3.6   -1.1   0.7	  10.1	  1.5	 8.9	 2.1
2006	0.8    0.6     2.3     1.5    0.7   0.9	  -7.8	 -1.7	-1.6	-0.7
2007	4.2    1.2     5.1     2.4   -1.7   1.2	   6.0	 -7.2	-0.8	-2.5
2008   -0.3   -5.4    -0.7    -4.4   -4.0   1.1   -2.6   -5.3   -5.4    -3.7

1. Output per unit of combined hours, capital services, energy, materials, 
   and purchased business services inputs.
2. Hours at work of all persons.
3. Combined units of hours, capital services, energy, materials, and 
   purchased business services, superlative chained index.

Source:  Output data are from the Bureau of the Census, U.S. Department of 
         Commerce, and modified by the Bureau of Labor Statistics, 
         U.S. Department of Labor.  Compensation and hours data are from 
         the Bureau of Labor Statistics.  Capital measures are based on data 
         supplied by the Bureau of Economic Analysis.  
         See also Technical Notes in this release.

Table 2.  Manufacturing sector: Productivity and related measures, 1987-2008			
										
Indexes 2005=100									
      
      Productivity	 	           Inputs
	
      Output  Output                                           Purc-    Comb-  
      per     per     Multi-   Sect-	   Cap-	 	       hased    ined
      hour    unit    factor   oral        ital                busi-    units 
      of all  of      Product- out-	   Serv-        Mater- ness     of all    
Year  persons capital ivity1   put  Hours2 ices4 Energy ials   services inputs3  
										
1987   51.0    96.6    75.9    62.9  123.2  65.1   84.9	 65.1	74.1	 82.8
1988   52.1    99.9    77.3    66.1  126.9  66.2   88.6	 66.0	80.7	 85.6
1989   52.6    99.2    76.9    67.2  127.7  67.8   88.1	 67.4	85.3	 87.4
1990   53.8    96.2    76.4    67.0  124.5  69.6   89.7	 68.6	86.3	 87.7
1991   55.2    92.4    76.1    65.8  119.3  71.3   89.4  68.3	85.5	 86.5
1992   57.3    93.2    75.6    68.0  118.7  73.0   88.5	 74.2	91.9	 90.0
1993   58.8    94.5    77.5    70.7  120.3  74.8   91.4	 74.7	92.6	 91.1
1994   60.8    97.5    79.6    74.8  123.1  76.8   94.6	 77.7	96.2	 94.0
1995   63.6    99.0    81.1    78.8  123.9  79.6   97.1	 81.8  100.9	 97.2
1996   65.9    98.4    81.4    81.4  123.6  82.8   94.4	 89.0  100.4	100.1
1997   69.5   101.2    83.6    87.4  125.8  86.4   92.4	 96.1  104.5	104.6
1998   73.3   101.7    85.8    92.1  125.5  90.5   95.4	102.3  104.1	107.3
1999   77.0   102.1    86.8    95.9  124.7  93.9  117.7	108.7  105.1	110.5
2000   80.4   102.3    89.9    98.9  123.1  96.7  128.4	106.7  103.7	110.0
2001   81.9    95.9    89.0    94.2  115.0  98.3  140.3	100.0  102.0	105.9
2002   87.9    94.6    91.8    93.9  106.9  99.2  108.6	101.0	98.7	102.3
2003   93.4    95.3    95.1    94.9  101.6  99.6   97.0	 99.3	98.1	 99.8
2004   95.5    97.2    98.6    96.6  101.1  99.3   90.8	 98.5	91.8	 97.9
2005  100.0   100.0   100.0   100.0  100.0 100.0  100.0	100.0  100.0	100.0
2006  100.8   100.6   102.3   101.5  100.7 100.9   92.2	 98.3   98.4	 99.3
2007  105.0   101.9   107.4   104.0   99.0 102.1   97.7	 91.3   97.6	 96.8
2008  104.7    96.4   106.7    99.4   95.0 103.2   95.2  86.4   92.3     93.2

1. Output per unit of combined hours, capital services, energy, materials, 
   and purchased business services inputs.
2. Hours at work of all persons.
3. Combined units of hours, capital services, energy, materials, 
   and purchased business services, superlative chained index.

Source:  Output data are from the Bureau of the Census, U.S. Department of 
         Commerce, and modified by the Bureau of Labor Statistics, 
         U.S. Department of Labor.  Compensation and hours data are from 
         the Bureau of Labor Statistics.  Capital measures are based on data 
         supplied by the Bureau of Economic Analysis.  
         See also Technical Notes in this release.

Table 3. Multifactor productivity measures for manufacturing industries
in selected periods, 1987-2008

Compound annual growth rates 


                    1987-   1987-   1990-   1995-   2000-   2007- 
                    2008    1990    1995    2000    2007    2008  

								
Manufacturing         1.6     0.2     1.2     2.1     2.6    -0.7
						
Nondurable            0.5    -0.5     0.6     0.1     1.6    -1.6
  manufacturing
Food, beverage,       0.1    -1.5     1.5    -1.3     1.1    -2.0
  and tobacco
  products
Textile mills         0.9     1.2     0.7     1.3     1.4    -5.8
  and textile
  product mills
Apparel, leather,    -0.4    -0.2     2.5     0.2    -2.5    -2.2
  and allied
  products
Paper products	      0.5    -0.3    -0.1     0.8     1.2    -0.3
Printing and          0.5     0.8    -0.3    -0.4     1.4     1.9
  related support
  activities
Petroleum and coal    0.7     0.3     0.5     0.8     0.6     4.4
  products
Chemical products     0.5    -1.0    -0.8     0.2     3.4    -7.1
Plastics and rubber   0.6     0.6     0.6     1.3     0.6    -3.9
  products
						
Durable manufacturing 2.4     0.8     1.6     3.5     3.3     0.3
Wood products 	     -0.1     0.9    -1.2    -0.3     1.1    -4.6
Nonmetallic mineral   0.3     0.2     1.0     0.2     0.3    -2.1
  products
Primary metals        0.6     1.0     0.2     0.3     0.6     2.1
Fabricated metal      0.6    -0.1     1.0     0.0     0.7     2.1
  products
Machinery 	     -0.2     1.0    -1.7    -1.3     1.3    -0.9
Computer and         10.6     5.6     9.6    15.7    10.6     6.7
  electronic
  products
Electrical           -0.5    -2.3    -2.4    -2.1     2.1     5.8
  equipment,
  appliances,
  and components
Transportation        0.4    -1.7    -0.3     0.8     2.3    -5.0
  equipment
Furniture and         0.3    -0.8     0.7     0.6     0.7    -2.0
  related products
Miscellaneous         1.8     2.3     0.2     2.6     2.1     2.4
  manufacturing


Note: Multifactor productivity measures by industry do not sum up to aggregate 
      manufacturing measures because industry measures exclude transactions 
      only within the specific industry while the aggregate manufacturing 
      measures also exclude transactions between all manufacturing industries.

Last Modified Date: November 19, 2010