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Economic News Release
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Multifactor Productivity Trends for Detailed Industries--2018


For release 10:00 a.m. (ET) Thursday, August 27, 2020
USDL-20-1619

Technical Information:	(202) 691-5606  •  productivity@bls.gov •  www.bls.gov/mfp 
Media Contact:	(202) 691-5902  •  PressOffice@bls.gov


MULTIFACTOR PRODUCTIVITY TRENDS FOR DETAILED INDUSTRIES -- 2018


Multifactor productivity--defined as output per unit of combined inputs--rose in 44 of the 86 
manufacturing industries measured in 2018, the U.S. Bureau of Labor Statistics reported today. This was 
up from 2017, when multifactor productivity increased in 32 manufacturing industries. Multifactor 
productivity rose in both of the transportation industries measured in 2018, just as in 2017.
 
Of the 12 manufacturing industries with employment of over 325,000, multifactor productivity increased the most in medical equipment and supplies (+5.8 
percent), as output increased while combined inputs was unchanged. Output growth occurred in all but 1 
of the 12 industries. In the remaining industry, bakeries and tortilla products, combined inputs was flat, 
leading to a decline in multifactor productivity. In architectural and structural metals, multifactor 
productivity declined due to growth in combined inputs that outpaced growth in output.

Among all 86 manufacturing industries, 5 industries posted multifactor productivity gains greater than 
7.0 percent: 
     • Turbine and power transmission equipment (+11.8 percent)
     • Electric lighting equipment (+9.9 percent)
     • Agriculture, construction, and mining machinery (+9.4 percent)
     • Rubber products (+9.4 percent)
     • Leather and hide tanning and finishing (+7.4 percent)

Multifactor productivity declined by 5.0 percent or more in 5 manufacturing industries in 2018. The 
largest productivity decline occurred in plywood and engineered wood products (-8.3 percent). 

Multifactor productivity increased in the two measured transportation industries: 
     • Air transportation (+3.0 percent)
     • Line-haul railroads (+0.5 percent)

Multifactor Productivity: Definition and Concepts

Changes in multifactor productivity show the relationship between changes in real output and changes in 
the combined inputs of labor, capital, and intermediate purchases (energy, materials, and purchased 
services) used in producing that output. Multifactor productivity is also known as total factor 
productivity.

A variety of factors that influence economic growth are not specifically accounted for among measured 
inputs, including: technological change, returns to scale, enhancements in managerial and staff skills, 
changes in the organization of production, and other efficiency improvements. Multifactor productivity 
reflects these factors. More information is available in the technical note.

Components of Multifactor Productivity Growth: Output and Combined Inputs

In 2018, output increased in 55 of 86 manufacturing industries, compared to 44 industries in 2017. Output increased by 10.0 percent or more in the following 5 industries in 2018:
     • Agriculture, construction, and mining machinery (+19.2 percent)
     • Turbine and power transmission equipment (+18.7 percent) 
     • Electrical equipment (+12.7 percent)
     • Electric lighting equipment (+10.3 percent)
     • Steel products from purchased steel (+10.1 percent)

Combined inputs of capital, labor, and intermediate purchases rose in 52 of 86 manufacturing 
industries in 2018, compared to 57 industries in 2017. Over two-thirds of the manufacturing industries 
saw growth in hours worked (59 industries) while fewer industries had growth in capital services (37 
industries) and intermediate purchases (46 industries).

The following industries had the largest increases in combined inputs in 2018:
     • Steel products from purchased steel (+12.7 percent)
     • Ship and boat building (+9.1 percent)
     • Alumina and aluminum production (+9.1 percent)
     • Agriculture, construction, and mining machinery (+8.9 percent) 
     • Iron and steel mills and ferroalloys (+8.7 percent)

In 3 manufacturing industries, multifactor productivity rose more than 3.0 percent despite falling 
output, as combined inputs fell more rapidly. This occurred in: 
     • Leather and hide tanning and finishing (+7.4 percent)
     • Computer and peripheral equipment (+6.9 percent)
     • Other furniture related products (+3.3 percent)

In the air transportation industry, output increased 5.1 percent and combined inputs increased 2.1 
percent in 2018. In line-haul railroads, output rose 3.1 percent and combined inputs increased 2.6 
percent.

Trends in Multifactor Productivity for Selected Time Periods

Year-to-year movements and long-term trends in industry multifactor productivity may reflect cyclical 
changes in the economy. However, long-term average annual percent changes in multifactor 
productivity are more reliable indicators of historical trends in industry performance.

More industries saw multifactor productivity growth over the long term than the short term. Over the 
long term period from 1987 to 2018, multifactor productivity grew in 62 manufacturing industries, 
compared to only 44 from 2017 to 2018. Average annual rates of change in 
multifactor productivity for nearly all manufacturing industries ranged between -2.0 percent and 2.0 
percent over the long term. 

In contrast, multifactor productivity declined by 2.0 percent or more in 22 industries in 2018. No 
industry saw an average annual decline of that magnitude from 1987 to 2018.

Between 1987 and 2018, the number of manufacturing industries with growth in multifactor productivity 
was highest in 1992, 2003, and 2010. These were years of economic growth following recessions. In 
contrast, relatively few manufacturing industries saw multifactor productivity growth in the recession 
years of 2001 and 2009. 

Table 3 details the average annual percent changes in multifactor productivity by industry for sub 
periods between 1987 and 2018. The sub period from 1990 to 1995 had the greatest number of 
manufacturing industries with multifactor productivity growth.

From 1987 to 2018, multifactor productivity rose in both air transportation and line-haul railroads by an 
average annual rate of 1.2 percent and 1.5 percent, respectively. While both industries posted gains in 
output, productivity grew more in line-haul railroads because its combined inputs showed little change 
over the long term.

Multifactor Productivity as a Source of Labor Productivity Growth

Multifactor productivity measures differ from the BLS labor productivity measures because they 
compare output to the combined inputs of hours worked, capital, and intermediate purchases. Labor 
productivity relates output only to hours worked. Mathematically, an industry’s labor productivity is 
equal to multifactor productivity plus the effects of factor substitution; that is, the combined effects of 
changes in weighted capital services relative to hours worked and weighted intermediate purchases 
relative to hours worked. These factor substitutions are referred to as contribution of capital intensity 
and contribution of intermediate purchases intensity.
 
Eighty out of the 86 manufacturing industries posted gains in labor productivity from 1987 to 2018. 
Among these industries, substitution of intermediate purchases for labor was the leading source of labor 
productivity growth. Growth in the contribution of intermediate purchases intensity occurs 
when firms purchase a greater share of materials instead of using their own labor. Contribution of 
intermediate purchases intensity may also rise when firms substitute contracted labor for payroll labor.
 
Between 2000 and 2007, multifactor productivity growth was the predominant source of labor 
productivity growth in many of the manufacturing industries. In contrast, labor productivity growth was 
driven mostly by contribution of intermediate purchases intensity in the other two sub periods.

Strong growth in multifactor productivity was the dominant source of labor productivity growth in the 
industries that manufacture computers and electronic products (computer and peripheral equipment, 
semiconductors and electronic components). Labor productivity growth in household appliances, motor 
vehicle parts, and audio and video equipment was also primarily driven by multifactor productivity 
growth. The remaining manufacturing industries with high average annual growth in labor productivity 
were mostly fueled by the contribution of intermediate purchases intensity.

Additional Information

Time periods for data covered by this release precede, and are therefore not impacted by, the COVID-19 
pandemic.
Access the productivity data dashboard at www.bls.gov/mfp/mfp_by_industry_dashboard.xlsx for
     • Detailed data series: indexes of multifactor productivity and related measures
     • Additional years, annual rates of change, and long-term data
More information from the BLS productivity program is available at www.bls.gov/mfp.
     • More detailed capital and intermediate purchases data available upon request
Subscribe to productivity news releases on the BLS website at 
https://subscriptions.bls.gov/accounts/USDOLBLS/subscriber/new.
Information in this release will be made available to sensory impaired individuals upon request. Voice 
phone: (202) 691-5200; Federal Relay Service: (800) 877-8339.


 

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Last Modified Date: August 27, 2020