For release 10:00 am (EDT) Thursday, May 5, 2016 USDL-16-0881
Technical information: (202) 691-5606 • mfpweb@bls.gov • www.bls.gov/mfp
Media contact: (202) 691-5902 • PressOffice@bls.gov
PRELIMINARY MULTIFACTOR PRODUCTIVITY TRENDS – 2015
Private nonfarm business sector multifactor productivity increased at a
0.2-percent annual rate in 2015, the U.S. Bureau of Labor Statistics
reported today. (See chart 1, table A.) This 2015 gain reflected a
2.8-percent increase in output and a 2.6-percent increase in the combined
inputs of capital and labor. Capital services grew by 2.6 percent and
labor input–which is the combined effect of hours worked and labor
composition–also grew by 2.6 percent. Capital intensity, defined as
capital services per hour, increased at a 0.4-percent annual rate in
2015, which is the first increase in this measure since 2010.
(See table 1.)
Multifactor productivity is calculated by dividing an index of real
output by an index of combined units of labor input and capital services.
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, accounting for the effects of
capital and labor. Multifactor productivity annual measures differ from
BLS quarterly labor productivity (output per hour worked) measures because
the former also includes the influences of capital services and shifts in
the composition of the workforce. Additionally, much of the source data
needed to construct multifactor productivity measures are not available
on a quarterly basis.
Private business sector multifactor productivity increased at a 0.2-percent
annual rate in 2015. A 2.9-percent increase in output and a 2.7-percent
increase in the combined inputs of capital and labor contributed to the
multifactor productivity gain in 2015. (See table 2, table A.)
Historical trends in the private nonfarm business sector
Multifactor productivity in the private nonfarm business sector grew 0.9
percent annually from 1987 to 2015. For the 2007-2015 period, multifactor
productivity grew 0.4 percent on average as combined inputs increased 0.9
percent and output increased 1.3 percent. The increase in combined inputs
reflected an increase in labor input of 0.6 percent along with a 1.6-percent
increase in capital services. (See table A.)
In the recent 2007-2015 period, annual labor productivity has slowed
significantly to 1.2 percent, as compared to the 1995-2000 and 2000-2007
periods. 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. For the
2007-2015 period, labor productivity growth slowed due to multifactor
productivity and the contribution of capital intensity falling below
pre-1995 levels. (See chart 2.)
For the 2007-2015 period, the contribution of capital intensity and the
contribution of labor composition amounted to 0.5 percent and 0.3
percent of private nonfarm business sector labor productivity growth,
respectively. Additionally, the growth in multifactor productivity of
0.4 percent contributed to an overall growth in output per hour of 1.2
percent. The contributions to labor composition slightly increased to
0.3 percent, while multifactor productivity and the contribution of
capital intensity greatly decelerated. (See chart 2, table B.)
The methodology for measuring preliminary multifactor productivity for
2015 is a simplified version of the methodology that BLS uses when
more detailed data are available. Measures will be revised early in
the next calendar year.
Table A. Productivity, output, and inputs in the private nonfarm business
and private business sectors for selected periods,1987-2015
Compound annual growth rates
1987- 1987- 1990- 1995- 2000- 2007- 2014-
2015 1990 1995 2000 2007 2015 2015
Private nonfarm business1
Productivity
Multifactor Productivity2 0.9 0.7 0.5 1.5 1.4 0.4 0.2
Labor productivity3 2.0 1.6 1.6 2.9 2.6 1.2 0.6
Output per unit of
capital services -0.4 -0.5 -0.3 -0.8 -0.4 -0.2 0.2
Output 2.9 3.3 3.0 5.0 2.8 1.3 2.8
Inputs
Combined inputs5 2.0 2.6 2.4 3.5 1.4 0.9 2.6
Labor input6 1.3 2.0 2.0 2.4 0.6 0.6 2.6
Hours 0.9 1.7 1.3 2.1 0.2 0.2 2.2
Labor Composition7 0.4 0.3 0.7 0.3 0.4 0.4 0.5
Capital services 3.3 3.8 3.3 5.9 3.2 1.6 2.6
Analytic ratio
Capital intensity8 2.4 2.0 2.0 3.7 3.0 1.4 0.4
Private business1
Productivity
Multifactor Productivity2 0.9 0.8 0.5 1.6 1.4 0.4 0.2
Labor productivity3 2.0 1.7 1.6 3.0 2.7 1.2 0.5
Output per unit of
capital services -0.3 -0.4 -0.2 -0.6 -0.4 -0.2 0.3
Output 2.9 3.3 2.9 5.1 2.8 1.4 2.9
Inputs
Combined inputs5 1.9 2.5 2.4 3.4 1.4 1.0 2.7
Labor input6 1.3 1.9 2.1 2.3 0.5 0.6 2.8
Hours 0.8 1.5 1.4 2.0 0.1 0.2 2.3
Labor Composition7 0.4 0.3 0.7 0.3 0.4 0.4 0.5
Capital services 3.2 3.7 3.2 5.7 3.2 1.6 2.6
Analytic ratio
Capital intensity8 2.3 2.1 1.8 3.7 3.0 1.4 0.2
1. Excludes government enterprises.
2. Output per combined units of labor input and capital services.
3. Output per hour worked.
4. The growth rate of each input is weighted by its share of current dollar
costs.
5. Hours at work by age, education, and gender group are weighted by each
group’s share of the total wage bill.
6. Ratio of labor input to hours.
7. Capital services per hour.
Table B. Labor productivity and the contributions of capital intensity,
labor composition, and multifactor productivity to labor productivity in the
private nonfarm business and private business sectors for selected periods,
1987-2015
Compound annual growth rates
1987- 1987- 1990- 1995- 2000- 2007- 2014-
2015 1990 1995 2000 2007 2015 2015
Private nonfarm business1
Labor productivity2 2.0 1.6 1.6 2.9 2.6 1.2 0.6
Contribution of
capital intensity3 0.8 0.7 0.6 1.2 1.0 0.5 0.1
Contribution of
labor composition4 0.3 0.2 0.5 0.2 0.2 0.3 0.3
Multifactor productivity5 0.9 0.7 0.5 1.5 1.4 0.4 0.2
Contribution of R&D to
multifactor productivity
Private business1
Labor productivity2 2.0 1.7 1.6 3.0 2.7 1.2 0.5
Contribution of
capital intensity3 0.8 0.7 0.6 1.2 1.0 0.5 0.1
Contribution of
labor composition4 0.3 0.2 0.5 0.2 0.2 0.3 0.3
Multifactor productivity5 0.9 0.8 0.5 1.6 1.4 0.4 0.2
1. Excludes government enterprises.
2. Output per hour worked.
3. Capital services per hour multiplied by capital's share of current
dollar costs.
4. Labor composition multiplied by labor's share of current dollar costs.
5. Output per unit of combined labor 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.
Technical Notes
The simplified methodology for preparing preliminary estimates of MFP is
outlined in the June 2005 Monthly Labor Review article, “Preliminary
estimates of multifactor productivity growth” located at
http://www.bls.gov/opub/mlr/2005/06/art3full.pdf. This methodology is
applied to both the private nonfarm business and private business
sectors and measures are calculated only for the most recent year.
Data for all previous years are identical to the March 26, 2015
“Multifactor Productivity Trends” news release (USDL-15-0480).
Capital Services
Capital services are the services derived from the stock of physical
assets and intellectual property assets. Capital services measures
constructed for the preliminary MFP measures are based on less detail
only for the most recent year. The preliminary measures consist of
six asset types as opposed to the 90 asset types for fixed business
equipment, structures, inventories, land, and intellectual property
products included in estimates for all previous years. The assets
included in the preliminary estimates are structures, fixed business
equipment, intellectual property products, inventories, rental
residences, and land. Investments, depreciation, and capital income
are estimated for each of these six aggregates. Capital services are
calculated by a chained superlative Tornqvist index combining stocks
of the six asset categories, weighted by capital income shares.
Labor Input
Labor input in private business and private nonfarm business is obtained
by chained superlative Tornqvist aggregation of the hours at work by all
persons, classified by age, education, and gender with weights determined
by each group’s share of the total wage. The labor composition index estimates
the effect of shifts in the age, education, and gender composition of the work
force on the efficiency of hours worked. The preliminary estimates of 2015
hours worked for the private nonfarm business and private business sectors
are extrapolated from the hours worked reported in the nonfarm business and
business sectors, respectively, in the February 4, 2016
“Productivity and Costs” news release (USDL-16-0209).
Additional information concerning data sources and methods of measuring
labor composition can be found in Cindy Zoghi, 2007,
“Measuring Labor Composition: A Comparison of Alternate Methodologies”
http://www.bls.gov/bls/fesacp1121407.pdf and in “Changes in the Composition
of Labor for BLS Multifactor Productivity Measures”
http://www.bls.gov/mfp/mprlabor.pdf.
Combined Inputs
Labor input and capital services are combined using chained superlative
Tornqvist aggregation, applying weights that represent each component's
share of total costs. The chained superlative Tornqvist index uses changing
weights; the share in each year is averaged with the preceding year's share.
Total costs are defined as the value of output less a portion of taxes on
production and imports. Most taxes on production and imports, such as excise
taxes, are excluded from costs; however, property and motor vehicle taxes
remain in total costs.
Capital Intensity
Capital intensity is the ratio of capital services to hours worked in the
production process. The higher the capital to hours ratio, the more capital
intensive the production process is.
In a production process, profit maximizing/cost-minimizing firms adjust the
factor proportions of capital and labor when the price of one factor is less
than the other factor; there is a tendency for the firms to substitute the
less expensive factor for the more expensive one. In the short run, changes
in hours worked are more variable than changes in capital services. Changes
in hours worked in business cycles can result in volatility of the capital
intensity ratio over short periods of time. In the long run an increase in
wages relative to the price of capital will induce the firm to substitute
capital for labor, resulting in an increase in capital intensity.
Rising labor costs are, in fact, an incentive for firms to introduce
automated production processes. Industry estimates of capital to hours
ratios can be obtained at http://www.bls.gov/mfp/mprdload.htm.
Value-Added Output
Private 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,
private households (including owner-occupied housing), and government
enterprises. This release presents data for the private business and
private nonfarm business sectors. The private business sector accounted
for approximately 74 percent of gross domestic product in 2014. Additionally,
the private nonfarm business sector excludes farms from the private business
sector, but includes agricultural services. Multifactor productivity measures
exclude government enterprises, while the BLS Quarterly Productivity and Cost
series include them.
The output measures are based on the National Income and Product Accounts
(NIPA) data released by the Bureau of Economic Analysis (BEA) on January 29,
2016 but do not reflect the revised data released by BEA on February 26, 2016.
The preliminary estimates of 2015 output for the private nonfarm business
and private business sectors are extrapolated from the output reported in the
nonfarm business and business sectors, respectively, in the February 4, 2016
“Productivity and Costs” news release (USDL-16-0209).
Multifactor Productivity
Multifactor productivity measures describe the relationship between
output in real terms and the inputs involved in its production. They
do not measure the specific contributions of labor or capital, or any
other factor of production. Rather, multifactor productivity is designed
to measure the joint influences of technological change, efficiency
improvements, returns to scale, reallocation of resources, and other
factors on economic growth, allowing for the effects of capital and labor.
The multifactor productivity indexes for private business and private
nonfarm business are derived by dividing an output index by an index of
capital services and labor input. The output indexes are computed as chained
superlative indexes (Fisher Ideal indexes) of components of real output.
Table 1. Private nonfarm business sector: productivity and related measures
for the 1987-2015 period1
Annual percent change from previous year
Output Combined
per units of
unit of Multi- labor and
Labor capital factor Value- Capital capital
produc- servic- Product- added Servic- servic- Capital
Year tivity2 es ivity3 Output4 Labor5 es6 es7 Intensity8
1988 1.7 0.8 1.2 4.6 3.2 3.8 3.4 0.9
1989 0.9 -0.3 0.2 3.7 3.2 4.0 3.5 1.2
1990 2.1 -1.8 0.6 1.5 -0.3 3.4 0.9 4.0
1991 2.0 -3.4 -0.4 -0.5 -1.5 3.0 -0.1 5.6
1992 4.3 1.6 3.2 4.1 0.2 2.5 0.9 2.7
1993 0.2 0.0 -0.3 3.2 3.7 3.2 3.5 0.2
1994 1.0 1.0 0.6 4.7 4.3 3.6 4.1 0.0
1995 0.8 -0.8 -0.2 3.6 3.5 4.4 3.8 1.6
1996 2.7 -0.2 1.6 4.6 2.0 4.8 2.9 3.0
1997 1.6 -0.2 0.9 5.3 3.7 5.5 4.3 1.9
1998 3.1 -0.8 1.2 5.3 3.0 6.2 4.0 4.0
1999 3.4 -0.9 1.9 5.6 2.2 6.5 3.6 4.3
2000 3.4 -1.9 1.6 4.4 1.1 6.4 2.7 5.4
2001 3.0 -3.7 0.5 0.9 -1.5 4.7 0.4 7.0
2002 4.3 -1.4 2.1 1.8 -1.9 3.2 -0.3 5.8
2003 3.5 0.5 2.2 3.2 0.1 2.6 0.9 3.0
2004 3.0 2.0 2.5 4.5 1.7 2.5 2.0 1.0
2005 1.9 0.7 1.5 3.8 1.8 3.1 2.3 1.2
2006 0.9 -0.2 0.3 3.3 2.7 3.5 3.0 1.1
2007 1.7 -0.6 0.6 2.4 1.1 3.0 1.8 2.3
2008 0.8 -3.8 -1.3 -1.3 -1.4 2.6 0.0 4.7
2009 3.4 -4.9 -0.3 -4.1 -6.3 0.8 -3.8 8.7
2010 3.2 2.8 2.9 3.2 0.2 0.4 0.3 0.4
2011 0.1 1.2 0.2 2.2 2.6 1.0 2.0 -1.1
2012 0.8 1.8 0.8 3.1 2.9 1.3 2.3 -1.0
2013 -0.1 -0.1 -0.1 1.8 1.9 1.8 1.9 0.0
2014 0.7 1.0 0.7 3.1 2.5 2.1 2.4 -0.3
2015 0.6 0.2 0.2 2.8 2.6 2.6 2.6 0.4
See footnotes following table 4.
Source: Bureau of Labor Statistics
Table 2. Private business sector: productivity and related measures
for the 1987-2015 period1
Annual percent change from previous year
Output Combined
per units of
unit of Multi- labor and
Labor capital factor Value- Capital capital
produc- servic- Product- added Servic- servic- Capital
Year tivity2 es ivity3 Output4 Labor5 es6 es7 Intensity8
1988 1.5 0.4 1.0 4.3 3.0 3.9 3.3 1.1
1989 1.1 -0.1 0.4 3.9 3.1 3.9 3.4 1.2
1990 2.4 -1.6 0.9 1.6 -0.5 3.3 0.8 4.0
1991 1.9 -3.2 -0.5 -0.5 -1.5 2.8 -0.1 5.3
1992 4.5 1.9 3.3 4.3 0.2 2.3 0.9 2.5
1993 0.2 -0.1 -0.4 3.0 3.5 3.0 3.3 0.3
1994 0.9 1.3 0.6 4.9 4.6 3.5 4.3 -0.5
1995 0.4 -0.9 -0.5 3.2 3.5 4.2 3.7 1.4
1996 3.1 0.1 1.9 4.7 1.8 4.6 2.7 3.0
1997 1.9 0.0 1.2 5.3 3.5 5.3 4.1 1.9
1998 3.2 -0.8 1.3 5.2 2.9 6.0 3.9 4.0
1999 3.6 -0.7 2.1 5.6 2.0 6.3 3.4 4.3
2000 3.6 -1.6 1.7 4.5 1.1 6.2 2.7 5.2
2001 3.1 -3.6 0.5 0.8 -1.7 4.6 0.3 7.0
2002 4.2 -1.2 2.1 1.8 -1.8 3.0 -0.3 5.5
2003 3.7 0.7 2.4 3.2 0.0 2.5 0.8 3.0
2004 3.1 2.0 2.5 4.5 1.7 2.5 1.9 1.1
2005 2.0 0.7 1.5 3.8 1.8 3.2 2.3 1.3
2006 1.0 -0.3 0.3 3.2 2.6 3.5 2.9 1.2
2007 1.5 -0.7 0.5 2.2 1.0 2.9 1.7 2.3
2008 0.8 -3.4 -1.2 -1.2 -1.3 2.3 0.0 4.4
2009 3.6 -4.5 -0.2 -3.9 -6.2 0.7 -3.7 8.5
2010 3.2 2.8 2.9 3.2 0.3 0.4 0.3 0.4
2011 0.0 1.0 0.1 2.1 2.6 1.1 2.0 -1.0
2012 0.6 1.4 0.6 2.9 2.9 1.5 2.3 -0.9
2013 0.4 0.2 0.2 2.0 1.8 1.9 1.8 0.2
2014 0.6 1.0 0.7 3.1 2.6 2.0 2.4 -0.5
2015 0.5 0.3 0.2 2.9 2.8 2.6 2.7 0.2
See footnotes following table 4.
Source: Bureau of Labor Statistics
Table 3. Private nonfarm business sector: indexes of productivity and related
measures, 1987-2015 period1
Indexes 2009=100
Output Combined
per units of
unit of Multi- labor and
Labor capital factor Value- Capital capital
produc- servic- Product- added Servic- servic- Capital
Year tivity2 es ivity3 Output4 Labor5 es6 es7 Intensity8
1987 61.2 120.6 82.0 53.4 78.8 44.2 65.1 50.7
1988 62.2 121.5 83.0 55.8 81.3 45.9 67.3 51.2
1989 62.7 121.2 83.1 57.9 83.9 47.8 69.6 51.8
1990 64.1 118.9 83.6 58.8 83.7 49.4 70.3 53.9
1991 65.3 114.9 83.3 58.4 82.4 50.9 70.2 56.9
1992 68.1 116.7 85.9 60.8 82.5 52.1 70.8 58.4
1993 68.3 116.7 85.6 62.8 85.6 53.8 73.3 58.5
1994 69.0 117.9 86.1 65.7 89.2 55.7 76.3 58.5
1995 69.5 117.0 85.9 68.1 92.4 58.2 79.2 59.4
1996 71.4 116.7 87.3 71.2 94.2 61.0 81.5 61.2
1997 72.6 116.4 88.1 74.9 97.7 64.3 85.0 62.3
1998 74.9 115.5 89.2 78.9 100.6 68.3 88.4 64.8
1999 77.4 114.5 90.9 83.3 102.9 72.8 91.6 67.6
2000 80.0 112.3 92.4 87.0 104.0 77.4 94.1 71.2
2001 82.5 108.2 92.9 87.7 102.4 81.1 94.5 76.2
2002 86.0 106.7 94.8 89.3 100.4 83.7 94.1 80.6
2003 89.1 107.2 96.9 92.1 100.6 85.9 95.0 83.0
2004 91.7 109.4 99.3 96.2 102.3 88.0 96.9 83.9
2005 93.5 110.1 100.8 99.9 104.2 90.7 99.1 84.9
2006 94.3 109.9 101.1 103.2 107.0 93.9 102.1 85.8
2007 95.9 109.2 101.7 105.6 108.2 96.7 103.9 87.8
2008 96.7 105.1 100.3 104.3 106.7 99.2 103.9 92.0
2009 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0
2010 103.2 102.8 102.9 103.2 100.2 100.4 100.3 100.4
2011 103.2 104.1 103.2 105.5 102.8 101.4 102.3 99.2
2012 104.0 105.9 104.0 108.8 105.8 102.8 104.6 98.2
2013 103.9 105.8 103.9 110.8 107.8 104.7 106.6 98.2
2014 104.6 106.9 104.7 114.2 110.5 106.8 109.1 97.9
2015 105.2 107.1 104.9 117.4 113.4 109.6 111.9 98.2
See footnotes following table 4.
Source: Bureau of Labor Statistics
Table 4. Private business sector: indexes of productivity and related
measures, 1987-2015 period1
Indexes 2009=100
Output Combined
per units of
unit of Multi- labor and
Labor capital factor Value- Capital capital
produc- servic- Product- added Servic- servic- Capital
Year tivity2 es ivity3 Output4 Labor5 es6 es7 Intensity8
1987 60.3 117.3 80.8 53.3 79.6 45.4 65.9 51.4
1988 61.3 117.8 81.6 55.6 82.0 47.2 68.1 52.0
1989 62.0 117.7 82.0 57.7 84.6 49.0 70.4 52.6
1990 63.5 115.9 82.7 58.7 84.2 50.6 70.9 54.8
1991 64.7 112.1 82.3 58.3 83.0 52.0 70.9 57.7
1992 67.6 114.2 85.0 60.8 83.2 53.3 71.6 59.1
1993 67.7 114.2 84.7 62.6 86.1 54.9 73.9 59.3
1994 68.3 115.7 85.2 65.7 90.0 56.8 77.1 59.0
1995 68.6 114.6 84.8 67.8 93.2 59.2 80.0 59.9
1996 70.7 114.7 86.4 71.0 94.9 61.9 82.2 61.6
1997 72.0 114.7 87.4 74.8 98.2 65.2 85.6 62.8
1998 74.3 113.9 88.5 78.7 101.1 69.1 88.9 65.3
1999 77.0 113.0 90.4 83.1 103.1 73.5 91.9 68.1
2000 79.7 111.2 92.0 86.8 104.2 78.0 94.4 71.6
2001 82.2 107.2 92.4 87.5 102.5 81.6 94.6 76.6
2002 85.7 105.9 94.4 89.1 100.6 84.1 94.4 80.9
2003 88.8 106.7 96.6 91.9 100.7 86.2 95.1 83.3
2004 91.6 108.8 99.1 96.1 102.3 88.3 97.0 84.2
2005 93.4 109.5 100.6 99.8 104.2 91.1 99.2 85.3
2006 94.3 109.2 100.9 103.1 106.9 94.3 102.1 86.4
2007 95.8 108.5 101.4 105.3 108.0 97.1 103.9 88.3
2008 96.6 104.7 100.2 104.1 106.6 99.3 103.9 92.2
2009 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0
2010 103.2 102.8 102.9 103.2 100.3 100.4 100.3 100.4
2011 103.1 103.8 103.0 105.4 102.9 101.5 102.3 99.3
2012 103.7 105.3 103.6 108.5 105.8 103.0 104.7 98.5
2013 104.1 105.5 103.8 110.7 107.7 104.9 106.6 98.7
2014 104.7 106.6 104.6 114.1 110.4 107.1 109.1 98.2
2015 105.2 107.0 104.8 117.4 113.5 109.8 112.0 98.4
See footnotes following table 4.
Source: Bureau of Labor Statistics
Footnotes, Tables 1-4
Source: The Bureau of Labor Statistics (BLS) develops productivity measures
using output and compensation data published by the Bureau of
Economic Analysis (BEA), hours data published by other BLS programs,
and capital data supplied by BEA and U.S. Department of Agriculture.
Also see Technical Notes in this release.
(1) The private business sector covers gross domestic product with the
exception of the output of general government, government
enterprises, non-profit institutions, the rental value of owner-
occupied real estate, and the output of paid employees of private
households. The private nonfarm business sector further excludes
farms but includes agricultural services.
(2) Output per hour worked.
(3) Output per combined units of labor input and capital services.
(4) Gross domestic product originating in the sector, chained superlative
index.
(5) Index of hours at work of all persons including employees,
proprietors, and unpaid family workers, classified by age, education,
and gender. This chained superlative index is computed by combining
changes in the hours of each age, education, and gender group weighted
by each group’s share of the total wage.
(6) A measure of the flow of capital services used in the sector.
Capital services measure the services derived from the stock of
physical assets and intellectual property products.
(7) The growth rates of labor input and capital services are combined
by weighting with their respective shares of current dollar costs,
and aggregating into a chained superlative index.
(8) Capital services per hour.
United States Department of Labor
