For release 10:00 a.m. (EDT) Tuesday, June 26, 2012 USDL-12-1288
Technical information: (202) 691-5606 • mfpweb@bls.gov • www.bls.gov/mfp
Media contact: (202) 691-5902 • PressOffice@bls.gov
MULTIFACTOR PRODUCTIVITY TRENDS IN MANUFACTURING - 2010
Manufacturing sector multifactor productivity increased at an annual rate of
7.5 percent in 2010, the U.S. Bureau of Labor Statistics reported today.
This was the largest increase recorded in the series, which began in 1987.
(See chart 1, table A.) The multifactor productivity gain in 2010 reflected
a 6.4 percent increase in output and a 1.1 percent decrease in combined
inputs.
Multifactor productivity measures the change in output per unit of combined
inputs. Multifactor productivity in manufacturing is designed to measure the
joint influences on economic growth of technological change, efficiency
improvements, returns to scale, reallocation of resources, and other factors,
allowing for the effects of capital, labor and intermediate inputs
(energy, materials, purchased business services). Multifactor productivity
measures differ from labor productivity (output per hour worked) measures
that are published quarterly by BLS because multifactor productivity measures
include information on capital services and intermediate inputs. Also, data
needed to construct multifactor productivity are not available on a quarterly
basis.
Durable manufacturing sector multifactor productivity increased 12.7 percent
in 2010, following a decline of 4.7 percent in 2009. This was the largest
increase recorded in the series, which began in 1987. Nondurable
manufacturing sector multifactor productivity increased 2.7 percent in
2010, following a 0.9 percent decrease in 2009. The gain in 2010 was
the largest increase since 2003. (See table C, table 3.)
Historical trends in manufacturing
Multifactor productivity in manufacturing grew 1.5 percent annually from
1987 to 2010 as sectoral output increased at a faster rate, 1.7 percent,
than combined inputs, 0.2 percent. During the same period, output per hour
(labor productivity) increased 3.4 percent. (See table A.) Of the 3.4
percent growth rate in labor productivity, multifactor productivity added
1.5 percent, capital intensity contributed 0.6 percent, materials intensity
added 0.8 percent, and purchased business services intensity added a 0.5
percent increase. The contribution of energy intensity was unchanged.
(See table B.)
For the 2007-2010 period, multifactor productivity rose at an annual rate of
1.3 percent compared to a 2.0 percent annual growth rate in the 2000-2007
period. The multifactor productivity average annual growth rate in 2007-2010
would have been significantly lower had it not been buoyed by the sharp
increase of 7.5 percent in 2010.
In 2010, the number of manufacturing industries that exhibited increasing
multifactor productivity, output, and combined inputs grew from the previous
year. Fourteen out of eighteen manufacturing industries exhibited increases
in multifactor productivity, fifteen showed increasing output, and seven
showed increasing combined inputs. (See chart 2.) Only four manufacturing
industries exhibited a decrease in multifactor productivity in 2010: textile
mills and textile product mills, paper products, primary metals, and
electrical equipment, appliances, and components. (See table 3.)
Revised measures
Previous and revised productivity measures and related data for 2008 and 2009
for the manufacturing, durable manufacturing, and nondurable manufacturing
sectors are displayed in table C. In 2009, multifactor productivity in
manufacturing was revised to a decline of 2.8 percent compared to a decline
of 5.7 percent as previously reported. In the nondurable manufacturing
sector, multifactor productivity fell 0.9 percent compared to the previously
reported decline of 3.1 percent. Multifactor productivity in the durable
manufacturing sector was revised to a decline of 4.7 percent instead of a
decline of 8.0 percent. The upward revision of multifactor productivity in
all three sectors was largely the result of a downward revision in the growth
of combined inputs in all three sectors. The revisions in both years were due
to the annual revision of the National Income and Product Accounts (NIPA)
released on December 13, 2011.
Table A. Compound annual growth rates for productivity, sectoral output, and
inputs in the manufacturing sector for selected periods, 1987-2010
In percent
1987- 1987- 1990- 1995- 2000- 2007- 2009-
2010 1990 1995 2000 2007 2010 2010
Productivity
Multifactor
productivity1 1.5 0.3 1.2 1.8 2.0 1.3 7.5
Output per hour
of all persons 3.4 1.8 3.4 4.8 3.9 1.9 6.5
Output per unit
of capital services -0.2 -0.1 0.7 0.8 0.3 -4.7 6.7
Sectoral Output 1.7 2.1 3.3 4.6 0.7 -4.0 6.4
Inputs
Combined inputs2 0.2 1.9 2.1 2.8 -1.3 -5.3 -1.1
Labor hours3 -1.7 0.4 -0.1 -0.1 -3.1 -5.8 -0.1
Capital services 1.9 2.3 2.6 3.8 0.4 0.7 -0.3
Energy -0.4 1.9 1.7 5.9 -3.9 -7.7 2.9
Materials 0.9 1.6 3.7 5.9 -1.1 -7.4 -3.7
Purchased business
services 0.9 5.3 3.2 1.3 0.2 -6.2 0.4
1Output per combined units of hours, capital services, energy, materials,
and purchased business services.
2The growth rate of each input is weighted by its share of current dollar
costs.
3Hours at work of all persons.
Table B. Compound annual growth rates in output per hour of all persons and
contributions of capital intensity, intermediate inputs intensity, and
multifactor productivity in the manufacturing sector for selected periods,
1987-2010
In percent
1987- 1987- 1990- 1995- 2000- 2007- 2009-
2010 1990 1995 2000 2007 2010 2010
Manufacturing
Output per hour
of all persons 3.4 1.8 3.4 4.8 3.9 1.9 6.5
Contribution of
capital intensity1 0.6 0.3 0.4 0.7 0.6 1.3 -0.1
Contribution of
information
processing
equipment
and software2 0.2 0.2 0.2 0.3 0.1 0.3 0.0
Contribution
of all
other capital
services 0.4 0.2 0.2 0.3 0.5 1.0 -0.1
Contribution of
intermediate inputs3 1.3 1.2 1.8 2.2 1.2 -0.7 -0.9
Contribution
of energy
intensity4 0.0 0.0 0.0 0.2 0.0 -0.1 0.1
Contribution
of materials
intensity5 0.8 0.4 1.1 1.8 0.6 -0.5 -1.1
Contribution
of purchased
business
services
intensity6 0.5 0.8 0.6 0.3 0.6 -0.1 0.1
Multifactor
productivity7 1.5 0.3 1.2 1.8 2.0 1.3 7.5
1Capital services per hour multiplied by capital's share of current dollar
costs.
2Information processing equipment and software per hour multiplied by its
share of total current dollar costs.
3Intermediate inputs per hour multiplied by intermediate inputs share of
current dollar costs.
4Energy per hour multiplied by energy’s share of current dollar costs.
5Materials per hour multiplied by materials’ share of current dollar costs.
6Purchased business services per hour multiplied by purchased business’
services' share of current dollar costs.
7Output per combined units of hours, capital services, energy, materials,
and purchased business services.
Table C. Previous and revised productivity and related measures for the
2008-2009 and 2007-2008 periods
Inputs
Purc-
Multi- Sect- Com- Cap- hased
factor oral bined ital busi-
Product- out- In- Serv- Mater- ness
Sector ivity1 put puts2 Hours3 ices Energy ials services
Annual percent change,
2008-2009
Manufacturing
Previous -5.7 -12.5 -7.2 -12.6 1.2 -11.4 -8.0 -5.3
Revised -2.8 -12.9 -10.4 -13.0 0.1 -24.1 -13.1 -9.1
Durable manufacturing
Previous -8.0 -19.3 -12.3 -15.1 1.5 -22.3 -17.3 -9.8
Revised -4.7 -20.3 -16.3 -15.4 -0.1 -28.0 -26.8 -13.4
Nondurable manufacturing
Previous -3.1 -6.6 -3.6 -8.3 1.1 -4.4 -4.8 0.4
Revised -0.9 -6.4 -5.6 -8.6 0.2 -21.4 -6.6 -2.4
Annual percent change,
2007-2008
Manufacturing
Previous -0.1 -4.4 -4.3 -4.0 2.8 3.9 -5.0 -11.9
Revised -0.4 -4.5 -4.1 -4.0 2.4 0.7 -5.1 -9.6
Durable manufacturing
Previous 2.2 -5.7 -7.7 -4.2 1.7 0.4 -12.6 -14.3
Revised 0.6 -5.8 -6.3 -4.2 1.3 -1.8 -11.1 -9.0
Nondurable manufacturing
Previous -2.2 -3.5 -1.3 -3.7 3.6 6.3 -0.9 -8.7
Revised -1.3 -3.6 -2.3 -3.6 3.2 2.4 -2.1 -10.6
1Output per combined units of hours, capital services, energy, materials, and
purchased business services.
2The growth rate of each input is weighted by its share of current dollar costs.
3Hours at work of all persons.
Technical Notes
Capital Services
Capital services are the services derived from the stock of physical assets
and software. There are 86 asset types for fixed business equipment and
software, structures, inventories, and land. The aggregate capital services
measures are obtained by Tornqvist aggregation of the capital stocks for
each asset type within each of the eighteen manufacturing NAICS industry
groupings using estimated rental prices for each asset type. Each rental
price reflects the nominal rate of return to all assets within the industry
and rates of economic depreciation and revaluation for the specific asset;
rental prices are adjusted for the effects of taxes. Data on investments in
physical assets and software are obtained from Bureau of Economic Analysis
(BEA). Nonfarm industry detail for land is based on IRS book value data.
Labor Hours
The construction of the hours measures follows the methodology described in
USDL 12-0494, Multifactor Productivity Trends, 2010,
http://www.bls.gov/news.release/archives/prod3_03212012.pdf. Hours in
manufacturing are directly aggregated and do not include the effects of
labor composition. Hours data for the manufacturing multifactor productivity
measures include hours for all persons working in the manufacturing sector –
wage and salary workers, the self-employed and unpaid family workers. The
primary source of hours data is the BLS Current Employment Statistics (CES)
survey. Hours paid of production workers are also obtained primarily from
the CES survey. The hours of these employees are then converted to an at-work
basis by using information from the Employment Cost Index (ECI) of the
National Compensation Survey (NCS) and the BLS Hours at Work Survey. Hours
at work for nonproduction workers are derived using data from the
Current Population Survey (CPS), the CES, and the NCS. The hours at work
of proprietors are derived from the CPS.
Hours at work data are based on underlying hours data published in the
February 2, 2012, USDL-12-0162, Productivity and Costs,
http://www.bls.gov/news.release/archives/prod2_02022012.pdf. Therefore, the
data do not reflect the benchmark revisions to the CES and other revisions
to hours released on March 7, 2012.
Intermediate Inputs
In manufacturing, intermediate inputs consist of energy, materials, and
purchased business services, and represent a large share of production
costs. Research has shown that substitution among inputs, including
intermediate inputs, affects productivity change. Therefore, it is
important to account for intermediate inputs in productivity measures at
the level of manufacturing. In contrast, the more aggregate productivity
measures compare "value-added" output with two classes of inputs, capital
and labor. Because of these differences in concepts and methodology,
productivity change in manufacturing cannot be directly compared with
changes in private business or private nonfarm business.
Data on intermediate inputs are obtained from BEA based on BEA annual
input-output tables. Tornqvist indexes of each of these three input
classes are derived at the 3-digit NAICS level and then aggregated to
total manufacturing. Materials inputs are adjusted to exclude
transactions between establishments within the same sector.
Combined Inputs
The five input indexes (capital services, hours, energy, materials, and
purchased business services) are combined using chained superlative
Tornqvist aggregation, employing weights that represent each component's
share of total costs. Total costs are defined as the current dollar value
of manufacturing sectoral output.
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 falls
relative to the price of 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.
Sectoral Output
The output concept used for multifactor productivity in manufacturing is
“sectoral output”. Sectoral output equals gross output (sales, receipts,
and other operating income, plus commodity taxes plus changes in inventories),
excluding transactions between establishments within the same sector.
In contrast, the output concept used for private business and private
nonfarm business is “real value added”. Real value added output in private
business equals gross domestic product less general government, government
enterprises, private households (including the rental value of owner-occupied
real estate), and non-profit institutions. Real value added output excludes
intermediate transactions between businesses.
The output index for manufacturing is computed using a chained superlative
index (Tornqvist) of three-digit NAICS industry outputs. Industry output is
measured as sectoral output, the total value of goods and services leaving
the industry. Wherever possible, the indexes of industry output are
calculated with a Tornqvist formula. This formula aggregates the growth
rates of the various industry outputs between two periods, using their
relative shares in industry value of production averaged over the two periods
as weights. BLS industry output measures for manufacturing industries are
constructed using data from the economic censuses and annual surveys of the
Bureau of the Census, U.S. Department of Commerce, together with information
on price changes, primarily from BLS.
Multifactor Productivity
The manufacturing multifactor productivity measures describe the relationship
between output in real terms and the inputs involved in its production.
Manufacturing multifactor productivity measures exclude intermediate inputs
between manufacturing establishments from both output and inputs.
Multifactor productivity measures do not account for the specific
contributions of labor, capital, or intermediate inputs. Rather, they are
designed to measure the joint influences on economic growth of technological
change, efficiency improvements, returns to scale, reallocation of resources
due to shifts in factor inputs across industries, and other factors. The
multifactor productivity indexes are derived by dividing an output index by
an index of the combined inputs of labor hours, capital services, energy,
non-energy materials, and purchased business services.
Other information
Comprehensive tables containing more detailed data than that which is
published in this press release are available upon request at 202-691-5606
or at http://www.bls.gov/mfp/mprdload.htm. More detailed information on
methods, limitations, and data sources of capital and labor are provided
in BLS Bulletin 2178 (September 1983), Trends in Multifactor Productivity,
1948-81 and on the BLS Multifactor Productivity website under the title
“Technical Information About the BLS Multifactor Productivity Measures”
for Major Sectors and 18 NAICS 3-digit Manufacturing Industries at
http://www.bls.gov/mfp/mprtech.pdf. Methods for measuring manufacturing
multifactor productivity are discussed in "Measurement of productivity
growth in U.S. manufacturing” in the July 1995 issue of the Monthly Labor
Review. See http://www.bls.gov/mfp/mprgul95.pdf.
Table 1. Manufacturing sector: productivity and related measures for the
1987-2010 period
Annual percent change from previous year
Productivity Inputs
Output Output Multi- Purc- Comb-
per per factor Sect- Cap- hased ined
hour unit Prod- oral ital busi- units
of all of uctiv out- Serv- Ene- Mater- ness of all
Year persons capital ity1 put Hours2 ices rgy ials services inputs3
1988 2.1 3.3 2.0 5.2 3.0 1.8 4.1 1.0 8.7 3.1
1989 1.0 -0.7 -0.5 1.6 0.6 2.4 -0.3 2.1 5.8 2.1
1990 2.2 -3.0 -0.7 -0.3 -2.5 2.7 1.9 1.7 1.5 0.4
1991 2.6 -3.9 -0.4 -1.7 -4.2 2.3 -0.3 -0.5 -0.8 -1.3
1992 3.8 1.0 -0.6 3.3 -0.5 2.2 -1.0 8.6 7.5 4.0
1993 2.6 1.5 2.6 3.9 1.3 2.4 3.4 0.8 0.8 1.3
1994 3.5 3.3 2.6 5.9 2.3 2.5 3.6 4.3 3.9 3.3
1995 4.5 1.7 1.8 5.2 0.7 3.5 2.9 5.4 4.9 3.4
1996 3.6 -0.6 0.3 3.4 -0.2 4.1 -2.7 9.0 -0.3 3.1
1997 5.4 2.8 2.7 7.3 1.8 4.5 -2.0 8.0 4.1 4.5
1998 5.5 0.7 1.3 5.2 -0.3 4.5 3.8 8.4 3.4 3.9
1999 4.8 0.6 1.2 4.1 -0.7 3.5 23.3 6.2 0.9 2.9
2000 4.4 0.5 3.6 3.0 -1.3 2.5 9.1 -1.9 -1.4 -0.6
2001 1.8 -5.8 -1.0 -4.8 -6.5 1.0 9.2 -6.4 -1.7 -3.8
2002 7.2 -0.6 3.3 -0.4 -7.1 0.2 -22.6 1.0 -3.2 -3.6
2003 6.2 1.3 3.7 1.0 -4.9 -0.3 -10.2 -1.6 -0.8 -2.5
2004 2.3 2.5 3.7 1.7 -0.5 -0.8 -6.3 -0.8 -6.3 -1.9
2005 4.7 3.2 1.5 3.6 -1.1 0.4 10.3 1.6 8.3 2.0
2006 1.0 0.9 2.3 1.7 0.7 0.7 -4.2 -1.1 -2.7 -0.7
2007 3.9 0.7 0.8 2.1 -1.6 1.4 0.6 -0.1 8.6 1.3
2008 -0.5 -6.8 -0.4 -4.5 -4.0 2.4 0.7 -5.1 -9.6 -4.1
2009 0.0 -13.0 -2.8 -12.9 -13.0 0.1 -24.1 -13.1 -9.1 -10.4
2010 6.5 6.7 7.5 6.4 -0.1 -0.3 2.9 -3.7 0.4 -1.1
1. Output per combined units of hours, capital services, energy, materials,
and purchased business services.
2. Hours at work of all persons.
3. Combined units of hours, capital services, energy, materials, and
purchased business services, chained superlative index.
Source: The Bureau of Labor Statistics (BLS) develops productivity measures
using output data published by the Bureau of the Census, U.S.
Department of Commerce, and modified by BLS. Compensation and hours
data are from the BLS. Capital measures are based on data supplied
by the BEA, U.S. Department of Commerce. See also Technical Notes in
this release.
Table 2.Manufacturing sector: indexes of productivity and related
measures, 1987-2010
Indexes 2005=100
Productivity Inputs
Output Output Multi- Purc- Comb-
per per factor Sect- Cap- hased ined
hour unit Prod- oral ital busi- units
of all of uctiv out- Serv- Ene- Mater- ness of all
Year persons capital ity1 put Hours2 ices rgy ials services inputs3
1987 51.2 92.8 76.6 63.1 123.2 67.9 83.4 63.9 71.5 82.3
1988 52.3 95.9 78.2 66.3 126.9 69.1 86.8 64.5 77.8 84.8
1989 52.8 95.2 77.8 67.4 127.7 70.8 86.5 65.8 82.3 86.6
1990 54.0 92.4 77.2 67.2 124.5 72.7 88.1 66.9 83.5 87.0
1991 55.4 88.8 76.9 66.0 119.3 74.3 87.9 66.6 82.9 85.8
1992 57.5 89.7 76.4 68.2 118.7 76.0 87.0 72.4 89.0 89.2
1993 58.9 91.1 78.4 70.9 120.3 77.8 89.9 72.9 89.7 90.4
1994 61.0 94.1 80.4 75.1 123.1 79.8 93.2 76.1 93.2 93.3
1995 63.8 95.7 81.9 79.0 123.9 82.6 95.8 80.2 97.8 96.5
1996 66.1 95.1 82.1 81.7 123.6 85.9 93.3 87.4 97.4 99.6
1997 69.7 97.7 84.3 87.7 125.8 89.8 91.4 94.4 101.5 104.0
1998 73.5 98.4 85.4 92.3 125.5 93.8 94.9 102.4 104.9 108.1
1999 77.1 99.0 86.4 96.1 124.7 97.1 117.0 108.7 105.9 111.2
2000 80.5 99.5 89.5 99.0 123.1 99.5 127.6 106.6 104.4 110.6
2001 81.9 93.8 88.6 94.2 115.0 100.5 139.4 99.8 102.6 106.3
2002 87.9 93.3 91.6 93.9 106.9 100.7 107.8 100.8 99.3 102.6
2003 93.3 94.5 94.9 94.9 101.6 100.4 96.8 99.2 98.5 99.9
2004 95.5 96.9 98.5 96.5 101.1 99.6 90.7 98.4 92.4 98.0
2005 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0
2006 101.0 100.9 102.3 101.7 100.7 100.7 95.8 98.9 97.3 99.3
2007 104.9 101.7 103.2 103.8 99.0 102.1 96.4 98.8 105.7 100.6
2008 104.3 94.8 102.7 99.1 95.1 104.6 97.1 93.7 95.6 96.5
2009 104.3 82.5 99.8 86.3 82.7 104.7 73.7 81.5 86.8 86.5
2010 111.1 88.0 107.4 91.9 82.7 104.4 75.9 78.5 87.2 85.6
1. Output per combined units of hours, capital services, energy, materials,
and purchased business services.
2. Hours at work of all persons.
3. Combined units of hours, capital services, energy, materials, and
purchased business services, chained superlative index.
Source: The Bureau of Labor Statistics (BLS) develops productivity measures
using output data published by the Bureau of the Census, U.S.
Department of Commerce, and modified by BLS. Compensation and hours
data are from the BLS. Capital measures are based on data supplied
by the BEA, U.S. Department of Commerce. See also Technical Notes in
this release.
Table 3. Multifactor productivity measures for manufacturing industries
in selected periods, 1987-2010
Compound annual growth rates
1987- 1987- 1990- 1995- 2000- 2007- 2009-
2010 1990 1995 2000 2007 2010 2010
Manufacturing 1.5 0.3 1.2 1.8 2.0 1.3 7.5
Nondurable
manufacturing 0.4 -0.5 0.7 -0.2 1.0 0.2 2.7
Food, beverage,
and tobacco products -0.2 -1.6 1.4 -1.7 0.7 -0.8 0.3
Textile mills and
textile product mills 0.9 1.1 0.7 1.5 1.6 -1.7 -4.0
Apparel, leather,
and allied products 2.4 0.0 2.9 0.6 4.2 2.6 5.9
Paper products 0.1 -0.2 -0.2 0.5 0.7 -1.2 -2.2
Printing and related
support activities 0.4 1.0 -0.2 -0.5 1.3 0.0 1.1
Petroleum and coal
products 0.9 0.8 0.8 1.0 0.4 2.3 6.6
Chemical products 0.1 -1.0 -0.7 -0.5 1.9 -0.9 1.9
Plastics and
rubber products 0.8 0.8 0.5 1.2 0.6 1.5 3.5
Durable manufacturing 2.3 0.9 1.5 3.3 2.8 2.6 12.7
Wood products 0.5 1.0 -1.3 -0.3 1.0 3.6 9.7
Nonmetallic
mineral products 0.0 0.2 0.8 0.1 -0.7 -0.1 4.7
Primary metals 0.3 1.0 0.0 0.3 -0.4 1.7 -1.7
Fabricated metal
products 0.4 -0.1 1.0 -0.2 0.6 0.1 9.9
Machinery 0.3 1.0 -1.9 -1.1 1.6 2.9 14.8
Computer and
electronic products 10.4 5.5 9.3 14.4 9.9 11.7 24.3
Electrical equipment,
appliances, and
components -1.2 -2.4 -2.4 -2.6 1.4 -1.6 -7.8
Transportation
equipment 0.2 -1.6 -0.5 0.5 1.7 -0.9 12.6
Furniture and
related products 0.4 -0.7 0.6 0.6 1.1 -0.9 12.0
Miscellaneous
manufacturing 2.0 2.7 -0.1 2.4 2.0 4.1 8.7
Note: Multifactor productivity measures by industry do not sum up to aggregate
manufacturing measures because industry measures exclude transactions
only within the specific industry while the aggregate manufacturing
measures also exclude transactions between all manufacturing industries.
United States Department of Labor
