Multifactor productivity in the private nonfarm business sector grew 0.9% annually, 1987–2013

July 11, 2014

Multifactor productivity in the private nonfarm business sector grew 0.9 percent annually from 1987 to 2013, a result of output growing 2.9 percent and combined inputs increasing 2.0 percent. For the 2007–2013 period, multifactor productivity grew 0.6 percent, on average, as combined inputs increased 0.4 percent and output increased 1.0 percent. The increase in combined inputs reflected a decrease in labor input of 0.1 percent combined with a 1.4-percent increase in capital services.

Compound annual growth rates for components of output per hour in the private nonfarm business sector, 1987–2013
Component1987–19901990–19951995–20002000–20072007–2013(p)

Multifactor productivity

0.5%0.5%1.4%1.4%0.6%

Contribution of labor composition

0.40.50.20.20.3

Contribution of capital intensity

0.70.71.21.00.7

Footnotes:
(p) Preliminary
 

Note: Multifactor productivity plus the contributions of capital intensity and labor composition may not sum to output per hour due to independent rounding.
 

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, reflecting increases in contribution of capital intensity and multifactor productivity.

For the 2007–2013 period, the contribution of capital intensity and the contribution of labor composition amounted to 0.7 percent and 0.3 percent, respectively. Additionally, the growth in multifactor productivity of 0.6 percent contributed to an overall growth of output per hour of 1.7 percent. This component of labor productivity growth more closely resembles the 1990–1995 period, prior to the upward shift in multifactor productivity and capital intensity.

In 2013, the contribution of capital intensity in the private nonfarm business sector increased 0.1 percent. Combined with a modest 0.2-percent increase in the contribution of labor composition and a 0.3-percent increase in multifactor productivity, output per hour of all workers increased at a 0.6-percent annual rate. From 1987 to 2013, labor productivity growth was much smaller than the average increase of 2.1 percent over the duration of the data series.

These data are from the Multifactor Productivity program. To learn more, see “Preliminary Multifactor Productivity Trends—2013,” news release USDL‑14‑1286 (HTML) (PDF). Multifactor productivity measures the change in output per unit of combined capital and labor inputs. It is designed to measure the joint influences of technological change, efficiency improvements, returns to scale, reallocation of resources, and other factors affecting economic growth, allowing for the effects of capital and labor.

SUGGESTED CITATION

Bureau of Labor Statistics, U.S. Department of Labor, The Economics Daily, Multifactor productivity in the private nonfarm business sector grew 0.9% annually, 1987–2013 on the Internet at http://www.bls.gov/opub/ted/2014/ted_20140711.htm (visited October 24, 2014).

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