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PRODUCTIVITY AND COSTS
First Quarter 2008, Preliminary
The Bureau of Labor Statistics of the U.S. Department of Labor today
reported preliminary productivity data--as measured by output per hour of
all persons--for the first quarter of 2008. The seasonally adjusted annual
rates of productivity change in the first quarter were:
1.9 percent in the business sector and
2.2 percent in the nonfarm business sector.
In both sectors, the productivity gains were due primarily to declines
in hours worked. In the business sector, output edged up 0.2 percent while
hours fell 1.6 percent. In nonfarm businesses, output rose 0.4 percent and
hours declined 1.8 percent (seasonally adjusted annual rates). In both
sectors, productivity grew faster than in the fourth quarter of 2007, when
output per hour rose 0.9 percent in the business sector and 1.8 percent in
the nonfarm business sector. First quarter measures are summarized in table
A and appear in detail in tables 1 through 5.
In manufacturing, productivity changes in the first quarter were:
4.1 percent in manufacturing,
2.3 percent in durable goods manufacturing, and
7.0 percent in nondurable goods manufacturing.
Manufacturing productivity growth in the first quarter reflected a 4.2
percent decline in hours worked in the sector and an output decline of 0.3
percent. After revisions, manufacturing productivity increased 4.2 percent
in the fourth quarter of 2007. Output and hours in manufacturing, which
includes about 12 percent of U.S. business sector employment, tend to vary
more from quarter to quarter than data for the aggregate business and nonfarm
business sectors. First quarter measures are summarized in table A and
appear in detail in tables 1 through 5.
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Table A. Productivity and costs: Preliminary first quarter 2008 measures
(Seasonally adjusted annual rates)
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Real
Hourly hourly Unit
Produc- compen- compen- labor
Sector tivity Output Hours sation sation costs
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Percent change from preceding quarter
Business 1.9 0.2 -1.6 4.2 -0.1 2.2
Nonfarm business 2.2 0.4 -1.8 4.4 0.1 2.2
Manufacturing 4.1 -0.3 -4.2 6.7 2.3 2.5
Durable 2.3 -0.5 -2.8 6.6 2.2 4.1
Nondurable 7.0 -0.1 -6.6 6.5 2.1 -0.4
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Percent change from same quarter a year ago
Business 3.2 2.6 -0.6 3.5 -0.7 0.2
Nonfarm business 3.2 2.6 -0.6 3.4 -0.7 0.2
Manufacturing 4.1 2.1 -2.0 2.8 -1.3 -1.3
Durable 5.5 3.6 -1.8 2.9 -1.2 -2.5
Nondurable 2.8 0.4 -2.3 2.6 -1.5 -0.2
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The data sources and methods used in the preparation of the
manufacturing series differ from those used in preparing the business and
nonfarm business series, and these measures are not directly comparable.
Output measures for business and nonfarm business are based on measures of
gross domestic product prepared by the Bureau of Economic Analysis of the
U.S. Department of Commerce. Quarterly output measures for manufacturing
reflect indexes of industrial production independently prepared by the Board
of Governors of the Federal Reserve System. See Technical Notes for further
information on data sources.
Business
Productivity in the business sector rose 1.9 percent in the first
quarter of 2008, as output grew 0.2 percent and hours of all persons at work
in the sector--employees, proprietors, and unpaid family workers--fell 1.6
percent (seasonally adjusted annual rates). The decrease in hours was the
largest since the second quarter of 2003, when they fell 2.1 percent. When
the first quarter of 2008 is compared to the first quarter of 2007,
productivity in the business sector grew 3.2 percent. This was the largest
four quarter change since a 3.4 percent increase from the second quarter of
2003 to the second quarter of 2004 (see tables A and 1).
Hourly compensation increased 4.2 percent during the first quarter of
2008 following a 3.7 percent rise in the previous quarter. Hourly
compensation includes wages and salary accruals, supplements, employer
contributions to employee benefit plans, and taxes. Real hourly
compensation, which takes into account changes in consumer prices, decreased
0.1 percent in the first quarter of 2008 after falling 1.3 percent in the
fourth quarter of 2007.
Unit labor costs rose 2.2 percent in the first quarter of 2008, compared
to a 2.8 percent increase in the fourth quarter. Growth in unit labor costs
is roughly equivalent to the change in hourly compensation minus the change
in output per hour. The implicit price deflator for the business sector,
which reflects changes in both unit labor costs and unit nonlabor payments,
grew at a 2.0 percent rate in the first quarter and 1.9 percent in the final
quarter of 2007.
Nonfarm business
Productivity increased 2.2 percent in the nonfarm business sector in the
first quarter of 2008 as output rose 0.4 percent and hours of all persons
fell 1.8 percent (seasonally adjusted annual rates). The decrease in hours
was the largest since the first quarter of 2003, when hours fell 2.3 percent,
and followed a 1.6 percent decline in the previous quarter (see tables A and
2.)
Productivity in the nonfarm business sector grew 3.2 percent from the
first quarter of 2007 to the first quarter of 2008, the largest four quarter
change since a 3.8 percent increase between the second quarters of 2003 and
2004.
Hourly compensation grew at a 4.4 percent annual rate in the first
quarter of 2008; similar to the fourth quarter rate of 4.6 percent. When the
rise in consumer prices was taken into account, real hourly compensation rose
0.1 percent in the first quarter following a 0.4 percent decline in the
fourth quarter of 2007.
Unit labor costs grew 2.2 percent in the first quarter of 2008 and 2.8
percent in the previous quarter. The implicit price deflator for nonfarm
business output increased 2.2 percent in the first quarter of 2008 and 1.6
percent in the fourth quarter of 2007.
Manufacturing
Productivity increased 4.1 percent in manufacturing in the first quarter
of 2008 as output decreased 0.3 percent and hours of all persons dropped 4.2
percent (seasonally adjusted annual rates). This 4.2 percent hours decrease
reflected a 2.8 percent decline in durable goods hours and a 6.6 percent drop
in hours worked in nondurable goods industries. Productivity rose 2.3
percent in durable manufacturing and 7.0 percent in nondurable manufacturing.
The hourly compensation of all manufacturing workers increased 6.7
percent during the first quarter of 2008 and real hourly compensation rose
2.3 percent (seasonally adjusted annual rates). Because hourly compensation
of manufacturing workers rose more rapidly than productivity, unit labor
costs increased in the first quarter, by 2.5 percent. Unit labor costs
increased 4.1 percent in durable goods manufacturing and fell 0.4 percent in
nondurable goods manufacturing.
Fourth quarter and annual measures for nonfinancial corporations
Fourth quarter and annual 2007 measures of productivity and costs also
were announced today for the nonfinancial corporate sector (tables B, C, and
6). Output per all employee hour grew 0.9 percent from the third to the
fourth quarter of 2007 as output rose 0.9 percent and employee hours were
unchanged.
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Table B. Nonfinancial corporations: Fourth quarter 2007 productivity and
cost measures
(Seasonally adjusted annual rates)
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Real
Hourly hourly Unit Implicit
Produc- compen- compen- labor Unit price
Period tivity Output Hours sation sation costs profits deflator
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Percent change from preceding quarter
2007 IV 0.9 0.9 0.0 3.5 -1.4 2.6 -16.9 0.3
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Percent change from same quarter a year ago
2007 IV 1.8 2.1 0.3 3.4 -0.6 1.6 -2.1 1.0
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Hourly compensation increased 3.5 percent in the fourth quarter of 2007,
leading to an increase of 2.6 percent in unit labor costs. When consumer
prices are taken into account, real hourly compensation fell 1.4 percent.
Unit profits fell 16.9 percent in the fourth quarter of 2007 and 10.2 percent
in the previous quarter. The implicit price deflator increased 0.3 percent
during the fourth quarter of 2007 after falling 1.6 percent in the third
quarter.
When the annual average for 2007 was compared with that for 2006, labor
productivity increased 1.4 percent in the nonfinancial corporate sector. In
the previous six years, 2000 through 2006, output per hour increased an
average of 2.6 percent per year. Output increased 2.1 percent in 2007, down
from 3.0 percent in 2006, and hours rose 0.7 percent, compared with 2.2
percent during the previous year. (See table C.)
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Table C. Nonfinancial corporations: Annual changes in productivity and
related measures, 1998-2007
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Measure 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
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Productivity 3.4 3.7 3.9 1.8 4.0 3.8 3.7 1.4 0.7 1.4
Output 5.7 6.0 5.2 -0.9 0.9 2.2 5.1 3.1 3.0 2.1
Hours 2.2 2.3 1.3 -2.7 -3.0 -1.5 1.3 1.7 2.2 0.7
Hourly
compensation 5.9 4.9 7.1 4.2 3.6 4.1 3.0 3.8 3.5 4.7
Real hourly
compensation 4.5 2.8 3.6 1.4 1.9 1.8 0.3 0.4 0.2 1.8
Unit labor
costs 2.4 1.2 3.1 2.4 -0.4 0.3 -0.7 2.4 2.8 3.2
Unit nonlabor
costs -0.2 0.9 3.8 8.1 -1.6 0.2 -1.6 2.7 1.4 1.1
Total unit
costs 1.7 1.1 3.3 3.9 -0.7 0.3 -0.9 2.4 2.4 2.6
Unit profits -11.2 -5.8 -15.8 -24.3 19.2 12.1 31.8 6.6 5.5 -5.7
Implicit price
deflator 0.0 0.3 1.2 1.3 0.6 1.2 2.0 2.9 2.8 1.6
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Hourly compensation grew 4.7 percent in 2007, and real hourly
compensation increased 1.8 percent. The increase in hourly compensation was
the largest in the series since 2000, when it had increased 7.1 percent.
Total unit costs in 2007 rose 2.6 percent, reflecting a 3.2 percent increase
in unit labor costs and a 1.1 percent increase in unit nonlabor costs. Unit
profits fell 5.7 percent in 2007. This was the first decline since 2001,
when the series fell 24.3 percent. The implicit price deflator, which
reflects both the unit costs and unit profits measures, rose 1.6 percent in
2007.
Revised measures
With this release, hours for all sectors were revised back to 2000 to
incorporate updated information on seasonal trends in Current Population
Survey data on hours worked. Employment was revised historically to exclude
secondary jobs of self employed and unpaid family workers in any month when
they did not report hours worked in those jobs. Also employment of
manufacturing proprietors is now calculated using the number of persons
employed; previously it was the number of persons at work.
Output data for the manufacturing sectors also were revised. Annual
output indexes are constructed by BLS using data from the Bureau of the
Census and the Bureau of Economic Analysis (BEA), both the U.S. Department of
Commerce, together with information on price changes, primarily from the
Bureau of Labor Statistics. These revisions begin with data for 1987 and
incorporate revised information on intermediate inputs. (See USDL 08-0857,
“Multifactor Productivity Trends in Manufacturing for 2006,” May 1, 2008
(http://www.bls.gov/news.release/pdf/prod3.pdf). Quarterly changes in
manufacturing output and related measures also now reflect revised Indexes of
Industrial Production, published by the Board of Governors of the Federal
Reserve System on March 28, 2008. Appendix tables 1-3 display quarterly and
annual data for manufacturing, durable manufacturing, and nondurable
manufacturing beginning in 2003. Quarterly historical data are available on
the BLS website. Annual historical data for total manufacturing and its
subsectors are presented in appendix tables 4-6.
A revised seasonally adjusted Consumer Price Index Research Series,
prepared by the BLS Office of Prices and Living Conditions for the period
1978 to 2007, has been incorporated into our consumer price series. As a
result, measures of real hourly compensation for all sectors were revised
back to 1984. Complete quarterly and annual series are available on the BLS
website.
Previous and revised measures for the fourth quarter and annual average
of 2007 in the business, nonfarm business, and manufacturing sectors are
compared in table D. In the business and nonfarm business sectors,
productivity was revised down slightly in the fourth quarter, primarily due
to downward revisions to output. Unit labor costs in these sectors were
revised up from the increases reported March 5.
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Table D. Previous and revised productivity and related measures
Quarterly percent change at seasonally adjusted annual rate
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Real
Hourly hourly Unit
Produc- compen- compen- labor
Sector tivity Output Hours sation sation costs
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Fourth quarter 2007
Business:
Previous 1.0 0.2 -0.7 3.6 -1.3 2.7
Revised 0.9 0.1 -0.7 3.7 -1.3 2.8
Nonfarm business:
Previous 1.9 0.3 -1.6 4.6 -0.5 2.6
Revised 1.8 0.2 -1.6 4.6 -0.4 2.8
Manufacturing:
Previous 2.3 -1.7 -3.9 4.4 -0.6 2.1
Revised 4.2 -0.4 -4.4 4.3 -0.6 0.2
Annual average 2007
Business:
Previous 1.9 2.3 0.4 5.0 2.3 3.1
Revised 1.9 2.3 0.4 5.0 2.1 3.1
Nonfarm business:
Previous 1.8 2.3 0.5 4.9 2.3 3.1
Revised 1.8 2.3 0.5 4.9 2.1 3.1
Manufacturing:
Previous 3.7 2.0 -1.7 5.4 2.7 1.6
Revised 3.4 1.6 -1.7 5.4 2.5 1.9
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Fourth quarter productivity growth in the manufacturing sector was
higher than reported March 5. Hours fell more than reported in March, and
had the largest decline since the third quarter of 2003. The upward revision
to productivity resulted in a downward revision to unit labor costs.
The 2007 annual average measures of real hourly compensation for the
business, nonfarm business, and manufacturing sectors were revised downward
due to a revision in the Consumer Price Index Research series. The 2007
annual averages in the manufacturing sector showed a downward revision in
output, which led to a downward revision in productivity and an upward
revision in unit labor costs.
Next release date
The next release of Productivity and Costs is scheduled for 8:30 AM EDT,
Wednesday, June 4, 2008. First quarter measures for nonfinancial
corporations and revised first quarter measures for business, nonfarm
business, and manufacturing will be released at that time.
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