Labor productivity, defined as output per hour of labor, is a measure of how efficiently labor is used in the production of goods and services. There are many possible factors affecting labor productivity growth, including changes in technology, capital investment, capacity utilization, use of inputs such as purchased services and contract labor, improved managerial skills or organization of production, and improved skills of the work force. Other factors, including increased globalization, offshoring of production, and domestic outsourcing, are also reflected in the productivity gains in some industries.
In this Spotlight, we examine BLS labor productivity trends from 2000 through 2010 for selected industries and sectors within the nonfarm business sector of the U.S. economy. These industry and sector trends provide insight into underlying shifts within the U.S. economy and the sources of overall productivity growth.
Here are some facts about labor productivity:
- Labor productivity rose for most industries during the first decade of the millennium. The growth was fueled by the expansion of information technology.
- From 2000 to 2007, productivity growth averaged between 0 and 4 percent per year in most of the industries studied. During the recessionary period from 2007 to 2009, productivity declined in over half of the industries studied. Subsequently, many industries recorded very large increases in productivity from 2009 to 2010, the first year of the recovery.
- Industries that were major producers, sellers, or users of information technology equipment were among the industries with the fastest productivity growth between 2000 and 2010.
- For some industries, including wireless telecommunications carriers and computer and peripheral equipment manufacturing, strong productivity growth accompanied rapid output increases over the period. In other industries, such as photofinishing and video tape and disc rental stores, productivity rose despite reductions in output because labor hours were reduced even more.
- Increases in labor productivity mitigate the impact of rising hourly compensation facing employers. Increases in labor productivity may also lead to increases in worker compensation. Most of the industries examined posted increases in labor productivity and real hourly compensation from 2000 to 2010.
- Productivity grew most rapidly in the information sector, while the manufacturing, retail trade, and wholesale trade sectors also had notable productivity increases. Productivity declined slightly in other services and more rapidly in the mining sector.
To learn more, visit www.bls.gov/spotlight/2013/productivity/.
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