Total factor productivity, 2023

For release 10:00 a.m. (ET) Thursday, March 21, 2024	USDL-24-0546
Technical information:	(202) 691-5606  •  Productivity@bls.gov  
					•  www.bls.gov/productivity
Media contact:	(202) 691-5902          •  PressOffice@bls.gov
	
TOTAL FACTOR PRODUCTIVITY – 2023

Total factor productivity (TFP) in the private nonfarm business sector 
increased 0.7 percent in 2023, the U.S. Bureau of Labor Statistics 
reported today. (See table A.) The 2023 increase in TFP reflects a 
2.6-percent increase in output and a 1.9-percent increase in the combined
inputs of capital and labor. Capital input grew by 2.8 percent and labor
input–which is the combined effect of hours worked and labor 
composition–increased by 1.2 percent. The 2023 growth in TFP is in close
range with the average annual growth experienced in the pre-pandemic 
2011-19 period.

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|NAICS and Index Changes						     |
|All industry series have been updated to reflect industry definition        |
|consistent with the 2017 North American Industry Classification System      |   
|(NAICS). All indexes are rebased to 2017=100 to reflect the new definitions.|
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Total factor productivity is calculated by dividing an index of real output 
by an index of combined units of labor input and capital input. Total factor
productivity annual measures differ from BLS quarterly labor productivity 
(output per hour worked) measures because TFP includes the influences of 
capital input and shifts in the composition of workers. Measures for the 
most recent year of this release are preliminary estimates. See the 
Technical Notes for additional information.

Private business sector total factor productivity also increased 0.7 percent
in 2023, as output increased 2.6 percent and combined inputs increased 
1.9 percent. (See table A.) 

Total Factor Productivity Trends: 2019-23

The 0.7-percent growth in TFP in the private nonfarm business sector in 2023
resulted from the growth in output outpacing the growth in combined inputs.
The growth of these three measures shows a similar pattern to growth 
experienced in 2019.

Combined input growth is made up of growth in three components: capital input,
hours worked, and labor composition. Capital input growth continued to 
accelerate since the 2.3-percent growth experienced in 2021, growing 2.8
percent in both 2022 and 2023. Hours worked decelerated from the robust
2021 growth of 5.9 percent, continuing to slow from the 4.1-percent growth
in 2022 to 1.3-percent growth in 2023. Labor composition decreased 0.1 
percent in 2023, but the level of the labor input index has remained consistent
above pre-pandemic levels.

Total Factor Productivity Trends – 1987-2023

Productivity is often best viewed as a long-run measure. TFP grew 0.5 percent 
per year in the private nonfarm business sector in the current 2019-23 
business cycle, the same growth as the previous 2007-19 cycle. However,
the growth in both these periods is below the long-run 1987-2023 annual 
growth of 0.8 percent. (See table A.) The growth in output and combined 
inputs follow a similar trend, with growth in the current 2019-23 
business cycle below their long-run averages. (See table A). 

Labor Productivity Trends

Labor productivity growth is the approximate sum of three components:
total factor productivity growth, the contribution of capital intensity,
and the contribution of shifts in the composition of labor. In 2023,
private nonfarm business labor productivity increased 1.3 percent, a rate 
slower than the 1.6-percent annual growth over the current business cycle,
2019-23 (See table B.)

The 2023 private nonfarm business sector growth in labor productivity was
a result of the 0.7-percent increase in total factor productivity, and a
0.6-percent increase in the contribution of capital intensity to labor 
productivity growth. Capital intensity is the ratio of capital input
growth to labor hours growth. The 2023 increase in capital intensity was 
driven by the growth in capital input of 2.8 percent outpacing hours
worked growth of 1.3 percent. (See tables A and B.) 

The contribution of labor composition to labor productivity for private 
nonfarm business was unchanged in 2023. Labor composition estimates the 
effect of shifts in the age, education, and gender composition of the 
workforce on hours worked. Over the 2019-23 business cycle, the annual 
contribution to labor productivity growth from labor composition was 
0.3 percent.

Detailed Capital Input Trends 2022

Capital input in the private nonfarm business sector increased at an 
annual rate of 2.8 percent in 2022, the latest year of detailed capital
data. The 2022 capital input growth accelerated 0.5 percentage point
(see table C) from the 2021 annual rate of 2.3 percent. The 2022 capital 
input growth was driven by the 7.6-percent growth in intellectual property
products, the largest growth in this asset category since 2001.

Capital input is made up of different types of capital assets, including 
equipment, structures, and intellectual property products. The contributions 
of various asset types to capital input growth over prior business cycles
highlights the shift from equipment assets to intellectual property products
over the last 30 years. Capital input growth peaked in the 1990-2000 business
cycle driven by the contributions of equipment and intellectual property 
products, which consist of software, research and development, and artistic
originals assets. However, the contributions from equipment slowed 
dramatically over the next two business cycles, leading to capital input 
growth of 2.4 percent per year in the 2007-19 business cycle, half of the 
annual 4.7-percent growth peak during 1990-2000. Equipment’s contribution to
capital growth continued to slow in the current 2019-22 business cycle but 
was offset by a large increased contribution from intellectual property 
products. 

Underlying asset detail within the equipment and intellectual property 
product asset types allow for examination of the shift from equipment to 
intellectual property products. The equipment asset type can be further 
broken down into information processing equipment, motor vehicles 
including autos, light trucks, and other vehicles, and all other equipment.
The contributions of information processing equipment, which includes 
communication equipment, computers, and other information asset types,
contributed 1.6 percentage points to capital input annual growth of 4.7 
percent during the 1990-2000 business cycle. However, in the current 2019-22
period, these assets only contributed 0.5 percentage points.

Within intellectual property products, research and development (R&D) 
is the main contributing asset for all time periods. In the 2019-22 
period the increased contributions of R&D and pre-packaged software 
led to the increased contribution of intellectual property products.