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Economic News Release

Technical note

                                       Technical Note

Labor Productivity: Labor productivity describes the relationship between output and the labor hours 
involved in its production. These measures show the changes from period to period in the amount of 
goods and services produced per hour worked. Although the labor productivity measures relate real 
output in an industry to hours worked of all persons in that industry, they do not measure the specific 
contribution of labor to growth in output. Rather, they reflect the joint effects of many influences, 
including: changes in technology; capital investment; utilization of capacity, energy, and materials; the 
use of purchased services inputs, including contract employment services; the organization of 
production; the characteristics and effort of the workforce; and managerial skill. 

Unit Labor Costs: Unit labor costs represent the cost of labor required to produce one unit of output. 
The unit labor cost indexes are computed by dividing an index of nominal industry labor compensation 
by an index of real industry output. Unit labor costs also describe the relationship between compensation 
per hour worked (hourly compensation) and real output per hour worked (labor productivity). When 
hourly compensation growth outpaces productivity, unit labor costs increase. Alternatively, when 
productivity growth exceeds hourly compensation, unit labor costs decrease. 

Output: Industry output is measured as an annual-weighted index of the changes in the various products 
(in real terms) provided for sale outside the industry. Real industry output for data in this release is 
derived by deflating nominal sales or values of production using price indexes. Industry output measures 
are constructed primarily using data from the economic censuses and annual surveys of the U.S. Census 
Bureau and U.S. Department of Commerce, together with information on price changes from BLS. 

Labor Hours: Labor hours are measured as annual hours worked by all employed persons in an 
industry. This includes hours worked for pay as well as uncompensated work time. Data on industry 
employment and hours come primarily from the BLS Current Employment Statistics (CES) survey and 
Current Population Survey (CPS). CES data on the number of jobs held by wage and salary workers in 
nonfarm establishments are supplemented with CPS data on self-employed and unpaid family workers 
to estimate industry employment. Hours worked estimates are derived using CES and CPS employment, 
CES data on the average weekly hours paid of all employees, CPS data on hours of self-employed and 
unpaid family workers, and ratios of hours worked to hours paid based on data from both the CPS and 
the National Compensation Survey (NCS). For some industries, employment and hours data are 
supplemented or further disaggregated using data from the BLS Quarterly Census of Employment and 
Wages (QCEW), the Census Bureau, or other sources. Hours worked are estimated separately for 
different types of workers and then are directly aggregated; no adjustments for labor composition are 

Labor Compensation: Labor compensation, defined as payroll plus supplemental payments, is a 
measure of the cost to the employer of securing the services of labor. Payroll includes salaries, wages, 
commissions, dismissal pay, bonuses, vacation and sick leave pay, and compensation in kind. 
Supplemental payments include both legally required expenditures and payments for voluntary 
programs. The legally required portion consists primarily of federal old age and survivors’ insurance, 
unemployment compensation, and workers’ compensation. Payments for voluntary programs include all 
programs not specifically required by legislation, such as the employer portion of private health 
insurance and pension plans. Industry compensation measures are constructed primarily using data from 
the BLS QCEW and the economic censuses of the Census Bureau, U.S. Department of Commerce.

Annual Percent Change: The annual percent change is the compound annual growth rate in an index 
series over a period of more than one year. The change of an index series varies from year to year. 
However, the annual percent change is the constant rate that can be applied to each year in a period, 
from the start to the end, that would give the same total result. It is calculated as (Ending Value/Starting 
Value)^(1/Number of Years)-1.

Last Modified Date: June 09, 2023