Multifactor productivity trends, 2012

For release 10:00 a.m. (EDT) Thursday, April 3, 2014	USDL- 14-0529
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		MULTIFACTOR PRODUCTIVITY TRENDS - 2012

Private nonfarm business sector multifactor productivity increased at a 1.5 
percent annual rate in 2012, the U.S. Bureau of Labor Statistics reported 
today. This gain in 2012 reflected a 3.8-percent increase in output and 
2.2-percent increase in the combined inputs of capital and labor. Capital
services grew by 1.4 percent, and labor input – which is the combined effect
of hours worked and labor composition – grew 2.7 percent, the largest gain
since 1997. Capital services per hour of all persons decreased at a rate of
0.8 percent in 2012 after falling 1.1 percent in 2011. The decreases in 2011
and 2012 are the only two years of decline in the measure which began in 
1987. (See chart 1, table A, table 1.)

Multifactor productivity measures the change in output per unit of combined
capital and labor input. It is designed to measure the joint influences of 
technological change, efficiency improvements, returns to scale, reallocation
of resources, and other factors of economic growth, allowing for the effects 
of capital and labor. Multifactor productivity, therefore, differs from labor
productivity (output per hour worked) measures that are published quarterly 
by BLS. Multifactor productivity includes information on capital services, 
hours worked, and shifts in the composition of labor. Estimates of capital 
services and labor composition are not included in the quarterly labor 
productivity measures. Additionally, much of the source data needed to 
construct multifactor productivity measures are not available quarterly.

Private business sector multifactor productivity increased at a 1.4 percent 
annual rate in 2012, reflecting a 3.7-percent increase in output and 
2.3-percent increase in the combined inputs of capital and labor. The
increase in combined inputs of capital and labor was the largest since 2006. 
(See table A, table 2.)   
	
Historical trends in private nonfarm business

Multifactor productivity in private nonfarm business grew 1.0 percent annually
from 1987 to 2012. (See table A.)  For the 2007-2012 period, multifactor 
productivity grew 0.7 percent, due to a 0.8-percent increase in output coupled
with a 0.1-percent increase in combined inputs. In contrast, the 1.5-percent
increase in multifactor productivity in 2012 was a result of an increase in
output much larger than the increase in combined inputs. Output grew 3.8
percent over the year, while combined inputs grew 2.2 percent. (See table 1.)

Annual labor productivity growth can be viewed as the sum of three components:
multifactor productivity growth, the contribution of capital intensity, and 
the contribution of shifts in labor composition. Output per hour shifted 
sharply upwards after the 1990-1995 period. In particular, the contribution
of capital intensity to labor productivity growth became more pronounced 
after 1995. (See chart 2, table B.)  

For the 2007-2012 period, the contribution of capital intensity increased at 
a 0.9 percent annual rate. Output per hour of all persons increased at a 1.9
percent annual rate, close to the 2.2 percent annual rate seen during the 
entire 1987-2012 period. This was due to multifactor productivity increasing
at a 0.7 percent annual rate from 2007 to 2012, slower than the gains of 1.4
percent that occurred during both the 1995-2000 and 2000-2007 periods. 
(See chart 2, table B.)

For the 2007-2012 period, real capital services of information processing 
equipment (IPE) grew 4.7 percent annually and intellectual property products 
(IPP) grew 3.0 percent annually in the private nonfarm business sector. 
(See table 5.) For the 2000-2007 period, the growth rates of IPE and IPP were
somewhat higher, 8.8 percent and 5.1 percent, respectively. For both periods, 
IPE was markedly lower than the 18.5-percent increase in the 1995-2000 period.

The revised multifactor productivity measure for the most recent year is based
on more recent source data than were available for the preliminary multifactor
productivity release published on July 19, 2013, 
www.bls.gov/news.release/archives/prod3_07192013.pdf. Revisions to underlying
data affect multifactor productivity growth rates for the 2007-2012 period. 
(See table C.) In 2012, multifactor productivity growth in the private nonfarm
business sector was 1.5 percent, larger than the 0.9-percent increase 
previously reported, due to a 0.9 percentage point upward revision to output 
and a 0.2 percentage point upward revision to combined inputs. For 2011, 
multifactor productivity growth in the private nonfarm business sector was
0.7 percent, a 0.3 percentage point downward revision due to a downward 
revision to output and an upward revision to combined inputs.

Table A.  Compound annual growth rates for productivity, output, and inputs
in the private nonfarm business and private business sectors for selected
periods,1987-2012

Percent


                            1987-  1987-  1990-  1995-  2000-  2007-  2011-
                            2012   1990   1995   2000   2007   2012   2012

Private nonfarm business1

Productivity
  Multifactor Productivity2  1.0    0.5    0.5    1.4    1.4    0.7    1.5
    Output per hour of all
      persons                2.2    1.5    1.6    2.8    2.7    1.9    1.5
    Output per unit of
      capital services      -0.6   -0.5   -0.4   -0.9   -0.5   -0.5    2.3


Output                       2.9    3.3    3.0    5.1    2.8    0.8    3.8


Inputs

  Combined inputs3           2.0    2.8    2.5    3.6    1.4    0.1    2.2
   Labor input4              1.2    2.3    2.0    2.5    0.4   -0.5    2.7
     Hours                   0.7    1.7    1.3    2.2    0.1   -1.1    2.2
     Labor Composition5      0.5    0.6    0.7    0.3    0.3    0.6    0.5
   Capital services          3.5    3.8    3.4    6.0    3.3    1.3    1.4

Analytic ratio
  Capital services per
    hour of all persons      2.8    2.0    2.1    3.7    3.2    2.4   -0.8


Private business1

Productivity
  Multifactor Productivity2  1.0    0.6    0.5    1.6    1.4    0.7    1.4
    Output per hour of all
      persons                2.3    1.7    1.6    3.0    2.7    1.9    1.5
    Output per unit of
      capital services      -0.5   -0.5   -0.3   -0.6   -0.5   -0.4    2.2


Output                       2.9    3.3    2.9    5.1    2.8    0.8    3.7


Inputs

  Combined inputs3           1.9    2.7    2.5    3.5    1.3    0.1    2.3
   Labor input4              1.1    2.1    2.1    2.4    0.4   -0.5    2.7
     Hours                   0.7    1.6    1.4    2.0    0.0   -1.0    2.2
     Labor Composition5      0.5    0.6    0.7    0.3    0.3    0.5    0.5
   Capital services          3.4    3.8    3.3    5.8    3.3    1.3    1.5

Analytic ratio
  Capital services per
    hour of all persons      2.7    2.1    1.9    3.7    3.2    2.3   -0.7


1.  Excludes government enterprises.
2.  Output per unit of combined labor input and capital services.
3.  The growth rate of each input is weighted by its share of current dollar
    costs.
4.  Hours at work by age, education, and gender group are weighted by each
    group’s share of the total wage bill.
5.  Ratio of labor input to hours.

Table B.  Compound annual growth rates in output per hour of all persons 
and the contributions of capital intensity, labor composition, and 
multifactor productivity in the private nonfarm business and private 
business sectors for selected periods, 1987-2012

Percent



                            1987-  1987-  1990-  1995-  2000-  2007-  2011-
                            2012   1990   1995   2000   2007   2012   2012

Private nonfarm business1

Output per hour
of all persons               2.2    1.5    1.6    2.8    2.7    1.9    1.5

Contribution of
capital intensity2           0.9    0.7    0.7    1.2    1.0    0.9   -0.3

  Contribution of
  information processing
  equipment3                 0.3    0.3    0.3    0.6    0.3    0.2    0.0

  Contribution of
  intellectual property
  products4                  0.3    0.3    0.3    0.3    0.3    0.3    0.0

  Contribution of all
  other capital services     0.3    0.1    0.2    0.2    0.4    0.3   -0.4

Contribution of
labor composition5           0.3    0.4    0.5    0.2    0.2    0.4    0.3

Multifactor productivity6    1.0    0.5    0.5    1.4    1.4    0.7    1.5

  Contribution of R&D to
  multifactor productivity


Private business1

Output per hour
of all persons               2.3    1.7    1.6    3.0    2.7    1.9    1.5

Contribution of
capital intensity2           0.9    0.7    0.6    1.2    1.1    0.8   -0.3

  Contribution of
  information processing
  equipment3                 0.3    0.3    0.3    0.6    0.3    0.2    0.0

  Contribution of
  intellectual property
  products4                  0.3    0.3    0.3    0.4    0.3    0.3    0.0

  Contribution of all
  other capital services     0.3    0.2    0.1    0.2    0.4    0.4   -0.3

Contribution of
labor composition5           0.3    0.4    0.5    0.2    0.2    0.3    0.3

Multifactor productivity6    1.0    0.6    0.5    1.6    1.4    0.7    1.4

1. Excludes government enterprises.
2. Capital services per hour multiplied by capital's share of current dollar
   costs.
3. Information processing equipment per hour multiplied by its share of 
   current dollar costs.
4. Intellectual property products per hour multiplied by its share of current
   dollar costs.
5. Labor composition multiplied by labor's share of current dollar costs.
6. Output per unit of combined labor input and capital services.


Note: Multifactor productivity plus contribution of capital intensity and
labor composition may not sum to output per hour due to independent
rounding.  Contribution of information processing equipment and all other
capital services may not sum to the contribution of capital intensity due
to independent rounding.

Table C. Annual growth rates of the previous and revised multifactor
productivity measures in the private nonfarm business and private
business sectors for the 1987-2012 period

Annual percent change from previous year

          Private Nonfarm Business      Private Business
Year      Previous      Revised         Previous      Revised


1988         1.0          1.0              0.8          0.7
1989         0.0          0.1              0.3          0.4
1990         0.4          0.3              0.6          0.6
1991        -1.0         -0.8             -1.0         -0.8
1992         2.3          2.5              2.6          2.8
1993         0.3         -0.1              0.2         -0.2
1994         0.7          0.6              0.7          0.6
1995         0.0          0.3             -0.3          0.0
1996         1.4          1.4              1.7          1.8
1997         0.6          0.7              0.8          0.9
1998         1.5          1.6              1.5          1.6
1999         1.7          1.8              1.8          2.0
2000         1.6          1.4              1.7          1.6
2001         0.7          0.5              0.8          0.5
2002         2.4          2.1              2.4          2.1
2003         2.5          2.4              2.7          2.6
2004         2.4          2.8              2.4          2.9
2005         1.1          1.4              1.0          1.4
2006         0.4          0.3              0.4          0.4
2007         0.3          0.4              0.3          0.3
2008        -1.4         -1.3             -1.2         -1.2
2009        -0.4         -0.3             -0.1         -0.1
2010         2.6          2.7              2.5          2.6
2011         1.0          0.7              0.7          0.6
2012         0.9          1.5              0.9          1.4

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Last Modified Date: April 03, 2014