Economic News Release

				TECHNICAL NOTES

Labor Hours: Hours data for the labor productivity and cost measures include
hours for all persons working in the sector--wage and salary workers, the
self-employed and unpaid family workers. The primary source of hours and
employment data is the BLS Current Employment Statistics (CES) program, which
provides monthly survey data on the number of jobs held by wage and salary 
workers in nonfarm establishments. The CES also provides average weekly paid
hours of production and nonsupervisory workers in these establishments. Weekly
paid hours are adjusted to hours at work using data from the National 
Compensation Survey (NCS). The BLS Hours at Work survey, conducted for this 
purpose, was used for earlier years. The Office of Productivity and Technology
estimates average weekly hours at work for nonproduction and supervisory 
workers using information from the Current Population Survey (CPS), the CES,
and the NCS.
     Data from the CPS are used for farm labor, nonfarm proprietors, and 
nonfarm unpaid family workers. Estimates of labor input for government 
enterprises are derived from the CPS, the CES, and the National Income and
Product Accounts (NIPA) prepared by the Bureau of Economic Analysis (BEA) of 
the Department of Commerce.
     The CES measures jobs, counting a person who is employed by two or more
establishments at each place of employment. In contrast, the CPS features 
measures of employment that count each person only once and classify each 
person according to his or her primary job; hours worked at all jobs by that
person accrue to his or her primary job. However, the CPS also collects more
detailed information on employment and hours worked at primary jobs and all
other jobs, separately. The BLS productivity measures use the more detailed 
information on employment and hours to assign all hours worked to the correct 
industrial sector and avoid duplicating hours data from the CES.

Output: Business sector output is a chain-type, current-weighted index 
constructed after excluding from gross domestic product (GDP) the following
outputs: general government, nonprofit institutions, and private households
(including owner-occupied housing). Corresponding exclusions also are made in
labor inputs. Business output accounted for about 75 percent of the value of 
GDP in 2010. Nonfarm business, which excludes farming, accounted for about 74
percent of GDP in 2010.
     Annual indexes for manufacturing and its durable and nondurable goods
components are constructed by deflating current-dollar industry value of
production data from the U.S. Bureau of the Census with deflators from the 
BLS. These deflators are based on data from the BLS producer price program and
other sources. The industry shipments are aggregated using annual weights, and
intrasector transactions are removed. Quarterly manufacturing output measures
are based on the index of industrial production prepared monthly by the Board 
of Governors of the Federal Reserve System, adjusted to be consistent with
annual indexes of manufacturing sector output prepared by BLS. Durables 
include the following 3-digit NAICS industries: wood product manufacturing;
nonmetallic mineral product manufacturing; primary metal manufacturing; 
fabricated metal product manufacturing; machinery manufacturing; computer and
electronic product manufacturing; electrical equipment and appliance 
manufacturing; transportation equipment manufacturing; furniture and related
product manufacturing; and miscellaneous manufacturing. Nondurables include:
food manufacturing; beverage and tobacco product manufacturing; textile mills;
textile product mills; apparel manufacturing; leather and allied product 
manufacturing; paper manufacturing; printing and related support activities;
petroleum and coal products manufacturing; chemical manufacturing; and 
plastics and rubber products manufacturing.
     Nonfinancial corporate output is a chain-type, current-weighted index
calculated on the basis of the costs incurred and the incomes earned from 
production.  The output measure excludes the following outputs from GDP:
general government; nonprofit institutions; private households; unincorporated
business; and those corporations classified as offices of bank holding 
companies, offices of other holding companies, or offices in the finance and
insurance sector. Nonfinancial corporations accounted for about 48 percent of
the value of GDP in 2010.
     
Productivity: These productivity measures describe the relationship between
real 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 these measures relate output to hours at work of all persons 
engaged in a sector, they do not measure the specific contribution of labor,
capital, or any other factor of production. Rather, they reflect the joint 
effects of many influences, including changes in technology; capital 
investment; level of output; utilization of capacity, energy, and materials; 
the organization of production; managerial skill; and the characteristics and
effort of the work force.

Labor Compensation: The measure includes accrued wages and salaries, 
supplements, employer contributions to employee benefit plans, and taxes.
Estimates of labor compensation by major sector, required for measures of
hourly compensation and unit labor costs, are based primarily on employee
compensation data from the NIPA, prepared by the BEA. The compensation of 
employees in general government, nonprofit institutions and private households
are subtracted from compensation of domestic employees to derive employee
compensation for the business sector. The labor compensation of proprietors
cannot be explicitly identified and must be estimated. This is done by 
assuming that proprietors have the same hourly compensation as employees in 
the same sector. The quarterly labor productivity and cost measures do not
contain estimates of compensation for unpaid family workers.  
      
Unit Labor Costs: The measures of unit labor costs in this release describe 
the relationship between compensation per hour and productivity, or real 
output per hour, and can be used as an indicator of inflationary pressure on
producers. Increases in hourly compensation increase unit labor costs; labor 
productivity increases offset compensation increases and lower unit labor 
costs. 

Presentation of the data: The quarterly data in this release are presented in
three ways: as percent changes from the previous quarter presented at a 
compound annual rate, as percent changes from the corresponding quarter of the
previous year, and as index number series where 2005=100. Annual data are 
presented both as index number series and percent changes from the previous
year.  
	The index numbers and rates of change reported in the productivity and
costs news release are rounded to one decimal place. All percent changes in 
this release and on the BLS web site are calculated using index numbers to 
three decimal places. These index numbers are available at the BLS web site, 
www.bls.gov/data/home.htm, or by contacting the BLS Division of Major Sector
Productivity. (Telephone 202-691-5606 or email DPRWEB@BLS.GOV)
      
Information in this release will be made available to sensory-impaired 
individuals upon request. Voice phone: 202-691-5606; Federal Relay Service
number: 1-800-877-8339.