Economic News Release

					Technical Note  

Labor Productivity

       The industry labor productivity measures describe the relationship between 
industry output and the labor time involved in its production.  They show the changes from period 
to period in the amount of goods and services produced per hour.  Although the labor productivity 
measures relate output to hours of employees or all persons in an industry, they do not measure the 
specific contribution of labor or any other factor of production.  Rather, they reflect the joint 
effects of many influences, including changes in technology; capital investment; utilization of 
capacity, energy, and materials; the use of purchased services inputs, including contract 
employment services; the organization of production; managerial skill; and the characteristics and 
effort of the workforce.
       Long-term productivity trends tend to be more reliable indicators of the performance of an 
industry than are year-to-year changes.  The annual changes in an industry’s output and use of 
labor may reflect cyclical changes in the economy as well as long-term trends.  

Output

       Industry output is measured as an annual-weighted index of the changes in the various 
products or services (in real terms) provided for sale outside the industry. Real industry output is 
usually derived by deflating nominal sales or values of production using BLS price indexes, but for 
some industries it is measured by physical quantities of output.
       Industry output measures are constructed primarily using data from the economic censuses 
and annual surveys of the U.S. Census Bureau, U.S. Department of Commerce, together with 
information on price changes primarily from BLS. Output measures for some mining and utilities 
industries are based on physical quantity data from the Energy Information Administration, U.S. 
Department of Energy, while output measures for some transportation industries are based on 
physical quantity data from the Bureau of Transportation Statistics, U.S. Department of 
Transportation. Other data sources for some industries include the U.S. Geological Survey, U.S. 
Department of the Interior; the U.S. Postal Service;	the Postal Rate Commission; and the Federal 
Deposit Insurance Corporation.

Labor Hours

       The primary source of industry employment and hours data is the BLS Current 
Employment Statistics (CES) survey. The CES provides monthly data on the number of total and 
nonsupervisory worker jobs held by wage and salary workers in nonfarm establishments, as well as 
data on the average weekly hours of nonsupervisory workers in those establishments. CES data are 
supplemented or further disaggregated for some industries using data from the BLS Quarterly 
Census of Employment and Wages (QCEW), the Bureau of the Census, or other sources. Data from 
the Current Population Survey (CPS) are also used to supplement the CES data. The industry 
productivity program estimates the average weekly hours of supervisory workers for each industry 
using data from the CPS together with the CES data. Data from the CPS are also used to estimate the 
employment and hours of self-employed and unpaid family workers in each industry.  Other 
sources of employment and hours data for some service industries include the Association of 
American Railroads, the U.S. Department of Transportation, and the U.S. Postal Service. Hours of 
all workers in an industry are treated as homogeneous and are directly aggregated.  

Unit Labor Costs

       Unit labor costs represent the cost of labor required to produce one unit of 
output.  The unit labor cost indexes are computed by dividing an index of industry labor 
compensation by an index of real industry output.  Unit labor costs also describe the relationship 
between compensation per hour and real output per hour (labor productivity). Increases in hourly 
compensation increase unit labor costs; increases in labor productivity offset compensation 
increases and lower unit labor costs. 
       Compensation, defined as payroll plus supplemental payments, is a measure of the cost to 
the employer of securing the services of labor.  Payroll includes salaries, wages, commissions, 
dismissal pay, bonuses, vacation and sick leave pay, and compensation in kind.  Supplemental 
payments include legally required expenditures and payments for voluntary programs.  The legally 
required portion consists primarily of Federal old age and survivors’ insurance, unemployment 
compensation, and workers’ compensation.  Payments for voluntary programs include all programs 
not specifically required by legislation, such as the employer portion of private health insurance 
and pension plans.

Additional Information

       Measures for the three added industries were developed using standard 
BLS methods as described above. Output measures for all three industries are based on receipts 
data from the U.S. Census Bureau, deflated with price indexes from BLS. Revenues for support 
activities for mining are based on additional data from the Department of Energy. The labor input 
measures for all three new industries were constructed using employment and hours data from BLS 
surveys. 
       The industries included in this release are classified according to the 2002 NAICS. Industry 
productivity measures for service-providing industries will be classified according to the 2007 
NAICS in 2010, with the publication of data for 2008 and the inclusion of data from the 2007 
economic censuses. All of the measures for 2007 in this release are preliminary and subject to 
revision.
       Industry productivity and related indexes and rates of change can be accessed online by 
visiting the Labor Productivity and Costs web site at http://www.bls.gov/lpc/.  Data on industry 
employment, hours, labor compensation, value of production, and the implicit price deflator for 
output for these industries are available upon request by calling the Division of Industry 
Productivity Studies (202-691-5618) or by sending a request by e-mail to dipsweb@bls.gov. While 
the rates of change reported by BLS in this news release are rounded to one decimal place, all 
industry productivity percent changes are calculated using index numbers to three decimal places.
       Information in this report will be made available to sensory-impaired individuals upon 
request. Voice phone: 202-691-5618; TDD message referral phone number: 1-800-877-8339.