For release 10:00 am (EDT) Wednesday, July 9, 2014 USDL-14-1286
Technical information: (202) 691-5606 • mfpweb@bls.gov • www.bls.gov/mfp
Media contact: (202) 691-5902 • PressOffice@bls.gov
PRELIMINARY MULTIFACTOR PRODUCTIVITY TRENDS – 2013
Private nonfarm business sector multifactor productivity increased at a 0.3
percent annual rate in 2013, the U.S. Bureau of Labor Statistics reported
today. (See chart 1, table A.) The gain in multifactor productivity was the
smallest annual percent change since a 0.3-percent decline in 2009. The
multifactor productivity increase in 2013 reflected a 2.3-percent increase
in output and a 1.9-percent increase in the combined inputs of capital and
labor. Capital services grew by 1.9 percent and labor input – which is the
combined effect of hours worked and labor composition – also grew by 1.9
percent. Capital services per hour of all persons slightly increased at a
rate of 0.3 percent in 2013 after falling 0.8 percent in 2012 and 1.1 percent
in 2011. (See 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 on 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 grew by 0.7 percent in 2013.
A 2.5-percent increase in output and a 1.8-percent increase in the combined
inputs of capital and labor contributed to the multifactor productivity gain
in 2013. (See table 2.)
Historical trends in the private nonfarm business sector
Multifactor productivity in the private nonfarm business sector grew 0.9
percent annually from 1987 to 2013. (See table A.) 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. In contrast, the 0.9-percent
average annual percent change in multifactor productivity from 1987 to 2013
was a result of output growing 2.9 percent and combined inputs increasing
2.0 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 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. (See chart 2, table B.)
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 persons increased at a 0.6 percent annual
rate. Labor productivity growth was much smaller than the average increase of
2.1 percent over the duration of the series, from 1987 to 2013. (See table B.)
The methodology for measuring preliminary multifactor productivity for 2013 is
a simplified version of the methodology that BLS uses when more detailed data
are available. Measures will be revised in early 2015.
Table A. Compound average growth rates for productivity, output, and inputs
in the private nonfarm business and private business sectors for selected
periods,1987-2013
In percent
1987- 1987- 1990- 1995- 2000- 2007- 2012-
2013 1990 1995 2000 2007 2013 2013
Private nonfarm business1
Productivity
Multifactor Productivity2 0.9 0.5 0.5 1.4 1.4 0.6 0.3
Output per hour of all
persons 2.1 1.5 1.6 2.8 2.7 1.7 0.6
Output per unit of
capital services -0.5 -0.5 -0.4 -0.9 -0.5 -0.3 0.3
Output 2.9 3.3 3.0 5.1 2.8 1.0 2.3
Inputs
Combined inputs3 2.0 2.8 2.5 3.6 1.4 0.4 1.9
Labor input4 1.2 2.3 2.0 2.5 0.4 -0.1 1.9
Hours 0.7 1.7 1.3 2.2 0.1 -0.6 1.6
Labor Composition5 0.5 0.6 0.7 0.3 0.3 0.5 0.3
Capital services 3.4 3.8 3.4 6.0 3.3 1.4 1.9
Analytic ratio
Capital services per
hour of all persons 2.7 2.0 2.1 3.7 3.2 2.0 0.3
Private business1
Productivity
Multifactor Productivity2 1.0 0.6 0.5 1.6 1.4 0.7 0.7
Output per hour of all
persons 2.2 1.7 1.6 3.0 2.7 1.7 1.0
Output per unit of
capital services -0.4 -0.5 -0.3 -0.6 -0.5 -0.3 0.7
Output 2.9 3.3 2.9 5.1 2.8 1.1 2.5
Inputs
Combined inputs3 1.9 2.7 2.5 3.5 1.3 0.4 1.8
Labor input4 1.2 2.1 2.1 2.4 0.4 -0.1 1.8
Hours 0.7 1.6 1.4 2.0 0.0 -0.6 1.5
Labor Composition5 0.5 0.6 0.7 0.3 0.3 0.5 0.3
Capital services 3.4 3.8 3.3 5.8 3.3 1.4 1.9
Analytic ratio
Capital services per
hour of all persons 2.6 2.1 1.9 3.7 3.2 2.0 0.4
1. Excludes government enterprises.
2. Output per combined units of 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, 1987-2013
In percent
1987- 1987- 1990- 1995- 2000- 2007- 2012-
2013 1990 1995 2000 2007 2013 2013
Private nonfarm business1
Output per hour
of all persons 2.1 1.5 1.6 2.8 2.7 1.7 0.6
Contribution of
capital intensity2 0.9 0.7 0.7 1.2 1.0 0.7 0.1
Contribution of
labor composition3 0.3 0.4 0.5 0.2 0.2 0.3 0.2
Multifactor productivity4 0.9 0.5 0.5 1.4 1.4 0.6 0.3
Contribution of R&D to
multifactor productivity
Private business1
Output per hour
of all persons 2.2 1.7 1.6 3.0 2.7 1.7 1.0
Contribution of
capital intensity2 0.9 0.7 0.6 1.2 1.1 0.7 0.1
Contribution of
labor composition3 0.3 0.4 0.5 0.2 0.2 0.3 0.2
Multifactor productivity4 1.0 0.6 0.5 1.6 1.4 0.7 0.7
1. Excludes government enterprises.
2. Capital services per hour multiplied by capital's share of current
dollar costs.
3. Labor composition multiplied by labor's share of current dollar costs.
4. Output per unit of combined labor and capital services.
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 April 3, 2014 “Multifactor Productivity
Trends” news release (USDL-14-0529).
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 bill. 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 2013 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
6, 2014 “Productivity and Costs” news release (USDL-14-0167). The estimate
of the 2013 labor composition index assumes relative wages across groups
remain constant between 2012 and 2013 using the Current Population Survey
(CPS).
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 if the price of one factor is less
than the other factor; there would be 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.
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 2012. Additionally, the private nonfarm business sector
excludes farms from the private business sector, but includes agricultural
services. Multifactor 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 30, 2014 but do not reflect the
revised data released by BEA on February 28, 2014. The preliminary estimates
of 2013 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 6, 2014 “Productivity and Costs” news
release (USDL-14-0167).
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 1987-2013 period1
Annual percent change from previous year
Combined
Output units of
Output per labor in-
per unit of Multi- put and Capital
hour capital factor Capital capital services
of all servic- Product- Labor Servic- servic- per hour of
Year persons es ivity2 Output3 Input4 es5 es6 all persons
1988 1.7 0.7 1.0 4.6 3.5 3.8 3.6 0.9
1989 0.9 -0.3 0.1 3.7 3.3 4.1 3.6 1.3
1990 2.0 -1.8 0.3 1.5 0.1 3.4 1.2 3.9
1991 2.0 -3.5 -0.8 -0.5 -1.1 3.1 0.3 5.7
1992 4.3 1.5 2.5 4.1 1.0 2.5 1.5 2.7
1993 0.2 -0.1 -0.1 3.2 3.4 3.3 3.3 0.3
1994 1.0 0.9 0.6 4.7 4.1 3.7 4.0 0.1
1995 0.8 -0.9 0.3 3.6 2.7 4.5 3.3 1.7
1996 2.7 -0.3 1.4 4.6 2.2 4.8 3.1 3.0
1997 1.6 -0.2 0.7 5.3 4.1 5.5 4.5 1.9
1998 3.1 -0.9 1.6 5.3 2.4 6.3 3.7 4.0
1999 3.5 -0.9 1.8 5.8 2.6 6.7 3.9 4.4
2000 3.3 -2.0 1.4 4.4 1.2 6.5 2.9 5.5
2001 3.0 -3.8 0.5 0.8 -1.6 4.8 0.4 7.0
2002 4.4 -1.5 2.1 1.8 -2.0 3.3 -0.3 6.0
2003 3.7 0.4 2.4 3.1 -0.3 2.7 0.7 3.3
2004 3.1 1.9 2.8 4.5 1.2 2.5 1.7 1.2
2005 2.1 0.6 1.4 3.8 1.9 3.2 2.4 1.5
2006 1.0 -0.2 0.3 3.3 2.6 3.5 2.9 1.2
2007 1.7 -0.7 0.4 2.4 1.3 3.1 2.0 2.5
2008 0.8 -3.9 -1.3 -1.3 -1.4 2.7 0.0 4.8
2009 3.4 -5.0 -0.3 -4.1 -6.5 0.9 -3.8 8.8
2010 3.3 2.8 2.7 3.2 0.6 0.4 0.5 0.5
2011 0.4 1.5 0.7 2.5 2.3 1.0 1.8 -1.1
2012 1.5 2.3 1.5 3.8 2.7 1.4 2.2 -0.8
2013 0.6 0.3 0.3 2.3 1.9 1.9 1.9 0.3
See footnotes following table 4.
Source: Bureau of Labor Statistics
Table 2. Private business sector: productivity and related measures
for the 1987-2013 period1
Annual percent change from previous year
Combined
Output units of
Output per labor in-
per unit of Multi- put and Capital
hour capital factor Capital capital services
of all servic- Product- Labor Servic- servic- per hour of
Year persons es ivity2 Output3 Input4 es5 es6 all persons
1988 1.5 0.3 0.7 4.3 3.4 4.0 3.6 1.2
1989 1.2 -0.2 0.4 3.9 3.2 4.0 3.5 1.3
1990 2.3 -1.6 0.6 1.6 -0.1 3.3 1.0 3.9
1991 1.9 -3.3 -0.8 -0.5 -1.0 2.9 0.3 5.4
1992 4.5 1.9 2.8 4.3 1.0 2.4 1.5 2.6
1993 0.2 -0.2 -0.2 3.0 3.2 3.2 3.2 0.4
1994 0.9 1.2 0.6 4.9 4.5 3.7 4.2 -0.3
1995 0.4 -1.0 0.0 3.2 2.7 4.3 3.2 1.4
1996 3.0 0.1 1.8 4.7 2.0 4.6 2.9 3.0
1997 1.9 0.0 0.9 5.3 3.9 5.3 4.4 1.8
1998 3.1 -0.8 1.6 5.2 2.3 6.1 3.5 4.0
1999 3.7 -0.7 2.0 5.8 2.4 6.5 3.7 4.4
2000 3.4 -1.7 1.6 4.5 1.2 6.3 2.9 5.3
2001 3.0 -3.8 0.5 0.7 -1.8 4.7 0.2 7.0
2002 4.4 -1.3 2.1 1.8 -1.9 3.1 -0.3 5.7
2003 3.9 0.6 2.6 3.2 -0.4 2.6 0.6 3.3
2004 3.2 1.9 2.9 4.6 1.1 2.6 1.6 1.3
2005 2.1 0.6 1.4 3.9 1.9 3.3 2.4 1.5
2006 1.0 -0.3 0.4 3.2 2.4 3.6 2.9 1.4
2007 1.6 -0.8 0.3 2.2 1.3 3.0 1.9 2.4
2008 0.8 -3.6 -1.2 -1.2 -1.4 2.5 0.0 4.6
2009 3.5 -4.6 -0.1 -3.9 -6.5 0.7 -3.9 8.5
2010 3.2 2.8 2.6 3.2 0.6 0.4 0.5 0.5
2011 0.3 1.2 0.6 2.4 2.2 1.2 1.8 -0.9
2012 1.5 2.2 1.4 3.7 2.7 1.5 2.3 -0.7
2013 1.0 0.7 0.7 2.5 1.8 1.9 1.8 0.4
See footnotes following table 4.
Source: Bureau of Labor Statistics
Table 3. Private nonfarm business sector: indexes of productivity and related
measures, 1987-2013
Indexes 2009=100
Combined
Output units of
Output per labor in-
per unit of Multi- put and Capital
hour capital factor Capital capital services
of all servic- Product- Labor Servic- servic- per hour of
Year persons es ivity2 Output3 Input4 es5 es6 all persons
1987 60.9 122.6 82.6 53.3 78.7 43.5 64.5 49.7
1988 62.0 123.5 83.4 55.7 81.4 45.1 66.8 50.2
1989 62.5 123.1 83.5 57.8 84.1 47.0 69.2 50.8
1990 63.8 120.8 83.8 58.7 84.2 48.6 70.0 52.8
1991 65.0 116.5 83.2 58.4 83.2 50.1 70.2 55.8
1992 67.8 118.3 85.3 60.8 84.1 51.4 71.3 57.3
1993 68.0 118.2 85.2 62.7 86.9 53.1 73.6 57.5
1994 68.7 119.3 85.7 65.6 90.5 55.0 76.6 57.6
1995 69.2 118.2 85.9 68.0 92.9 57.5 79.1 58.5
1996 71.1 117.9 87.2 71.1 95.0 60.3 81.5 60.3
1997 72.2 117.6 87.7 74.8 98.8 63.6 85.3 61.4
1998 74.4 116.6 89.2 78.8 101.2 67.6 88.4 63.9
1999 77.0 115.6 90.8 83.4 103.9 72.1 91.8 66.7
2000 79.6 113.2 92.1 87.0 105.2 76.9 94.5 70.3
2001 81.9 108.9 92.5 87.7 103.5 80.6 94.9 75.2
2002 85.6 107.3 94.4 89.3 101.4 83.3 94.5 79.8
2003 88.7 107.7 96.7 92.1 101.1 85.5 95.2 82.4
2004 91.5 109.8 99.5 96.3 102.4 87.7 96.8 83.4
2005 93.4 110.4 100.9 99.9 104.3 90.5 99.1 84.6
2006 94.3 110.2 101.2 103.2 107.0 93.7 102.0 85.6
2007 96.0 109.4 101.6 105.7 108.5 96.6 104.0 87.7
2008 96.7 105.2 100.3 104.3 106.9 99.1 104.0 91.9
2009 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0
2010 103.3 102.8 102.7 103.2 100.6 100.4 100.5 100.5
2011 103.7 104.3 103.4 105.8 102.9 101.4 102.3 99.4
2012 105.3 106.8 105.0 109.8 105.7 102.8 104.6 98.6
2013 105.9 107.2 105.4 112.3 107.7 104.8 106.6 98.8
See footnotes following table 4.
Source: Bureau of Labor Statistics
Table 4. Private business sector: indexes of productivity and related
measures, 1987-2013
Indexes 2009=100
Combined
Output units of
Output per labor in-
per unit of Multi- put and Capital
hour capital factor Capital capital services
of all servic- Product- Labor Servic- servic- per hour of
Year persons es ivity2 Output3 Input4 es5 es6 all persons
1987 60.2 119.5 81.4 53.2 79.6 44.5 65.3 50.3
1988 61.1 119.9 82.0 55.5 82.3 46.3 67.7 51.0
1989 61.8 119.7 82.3 57.6 85.0 48.2 70.0 51.6
1990 63.2 117.8 82.8 58.6 84.9 49.7 70.7 53.7
1991 64.4 113.8 82.1 58.3 84.0 51.2 71.0 56.6
1992 67.3 116.0 84.4 60.8 84.9 52.4 72.0 58.0
1993 67.4 115.7 84.2 62.6 87.6 54.1 74.3 58.3
1994 68.0 117.1 84.8 65.6 91.5 56.0 77.4 58.1
1995 68.3 115.9 84.7 67.7 94.0 58.4 79.9 58.9
1996 70.4 116.0 86.2 70.9 95.8 61.1 82.2 60.7
1997 71.7 116.0 87.0 74.7 99.6 64.4 85.8 61.8
1998 73.9 115.0 88.4 78.6 101.9 68.3 88.9 64.3
1999 76.7 114.3 90.2 83.1 104.3 72.8 92.2 67.1
2000 79.3 112.3 91.6 86.9 105.6 77.4 94.8 70.6
2001 81.7 108.0 92.1 87.5 103.7 81.0 95.1 75.6
2002 85.2 106.7 94.0 89.1 101.8 83.5 94.8 79.9
2003 88.5 107.3 96.5 91.9 101.4 85.7 95.3 82.5
2004 91.4 109.4 99.2 96.1 102.5 87.9 96.9 83.6
2005 93.3 110.0 100.6 99.8 104.5 90.8 99.2 84.9
2006 94.3 109.6 101.0 103.1 107.0 94.0 102.0 86.0
2007 95.8 108.7 101.3 105.3 108.4 96.9 104.0 88.1
2008 96.6 104.9 100.1 104.1 106.9 99.3 104.0 92.1
2009 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0
2010 103.2 102.8 102.6 103.2 100.6 100.4 100.5 100.5
2011 103.6 104.0 103.2 105.7 102.9 101.6 102.4 99.6
2012 105.1 106.3 104.7 109.6 105.7 103.1 104.7 98.8
2013 106.2 107.0 105.5 112.4 107.6 105.0 106.6 99.2
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 combined units of labor input and capital services.
(3) Gross domestic product originating in the sector, chained superlative
index.
(4) 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 bill.
(5) 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 assets. The assets included are fixed business
equipment, structures, intellectual property products, inventories, and
land.
(6) 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.
United States Department of Labor
