For release 10:00 a.m. (ET) Thursday, August 25, 2022 USDL-22-1714 Technical Information: (202) 691-5606 email@example.com www.bls.gov/productivity Media Contact: (202) 691-5902 PressOffice@bls.gov TOTAL FACTOR PRODUCTIVITY FOR DETAILED INDUSTRIES - 2020 Total factor productivity-defined as output per unit of combined inputs--fell in 60 of the 86 4-digit NAICS manufacturing industries in 2020, the U.S. Bureau of Labor Statistics reported today. In 2019 total factor productivity decreased in 56 manufacturing industries. Among transportation industries, total factor productivity decreased in both air transportation and line-haul railroads in 2020. Six of the eight largest 4-digit NAICS manufacturing industries (those with employment over 370,000) had decreasing total factor productivity in 2020. Only the printing and related support activities and semiconductors and electronic components industries had rising total factor productivity among the eight. Output fell from 2019 in all those industries except semiconductors and electronic components. The largest output decline among those industries occurred in aerospace products and parts (-19.0 percent). Six out of the 60 manufacturing industries with falling total factor productivity in 2020 had declines of more than 7.0 percent: Clay products and refractories (-9.9 percent) Aerospace products and parts (-9.3 percent) Forging and stamping (-8.3 percent) Cut and sew apparel (-7.3 percent) Turbine and power transmission equipment (-7.3 percent) Coating, engraving, and heat treating metals (-7.3 percent) Only six manufacturing industries posted total factor productivity gains greater than 5.0 percent (see table 1): Agricultural chemicals (+8.5 percent) Other wood products (+7.0 percent) Sawmills and wood preservation (+6.2 percent) Iron and steel mills and ferroalloys (+5.9 percent) Computer and peripheral equipment (+5.6 percent) Ship and boat building (+5.5 percent) Total factor productivity decreased in each of the two measured transportation industries: Air transportation (-45.8 percent) Line-haul railroads (-10.1 percent) Total Factor Productivity: Definition and Concepts Changes in total factor productivity show the relationship between changes in real output and changes in the combined inputs of labor, capital, and intermediate inputs (energy, materials, and purchased services) used to produce that output. 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. Total factor productivity reflects these factors. See the technical note for more information. Components of Total Factor Productivity Growth: Output and Combined Inputs In 2020, output decreased in all but 14 of 86 manufacturing industries, compared to 18 industries in 2019. Among the 14 industries that posted gains, output increased by 3.0 percent or more in the following four industries in 2020: Animal food (+4.7 percent) Grain and oilseed milling (+4.2 percent) Agricultural chemicals (+4.1 percent) Sawmills and wood preservation (+4.0 percent) Combined inputs of capital, labor, and intermediate inputs fell in 75 out of 86 manufacturing industries in 2020, compared to 53 in 2019. Most industries saw declines in hours worked (74 industries) and intermediate inputs (70 industries). Capital usage also fell in 56 of the manufacturing industries. Of the ten industries with rising combined inputs in 2020, the five with the largest gains were: Grain and oilseed milling (+7.6 percent) Animal food (+3.6 percent) Animal slaughtering and processing (+3.1 percent) Dairy products (+1.7 percent) Other leather products (+1.2 percent) In four manufacturing industries, total factor productivity rose more than 2.5 percent despite falling output as combined inputs fell more rapidly. This occurred in: Iron and steel mills and ferroalloys (+5.9 percent) Computer and peripheral equipment (+5.6 percent) Audio and video equipment (+4.7 percent) Other nonferrous metal production (+4.4 percent) Total factor productivity in both measured transportation industries declined because output fell more rapidly than combined input usage. In the air transportation industry, output declined 60.4 percent and combined inputs decreased 26.9 percent in 2020. In line-haul railroads, output declined 16.7 percent and combined inputs decreased 7.3 percent. Trends in Total Factor Productivity for Selected Time Periods Both year-to-year movements and long-term trends in industry total factor productivity may reflect cyclical changes in the economy. This was particularly true in 2020 due to onset of the COVID-19 pandemic. While long-term average annual percent changes in total factor productivity are affected by economic conditions such as the pandemic, these historical trends are nevertheless more reliable indicators of industry performance. More industries saw total factor productivity growth over the long term than the short term. Over the long-term period from 1987 to 2020, total factor productivity grew in 56 manufacturing industries, compared to only 26 from 2019 to 2020. (See tables 1 and 2.) Average annual rates of change in total factor productivity for nearly all manufacturing industries ranged between -2.0 percent and +2.0 percent over the long term. In contrast, total factor productivity declined by 2.0 percent or more in 39 industries in 2020. No industry saw an average annual decline of that magnitude from 1987 to 2020. Although the distribution of total factor productivity growth for all the manufacturing industries may change significantly annually, in the long run, the overwhelming majority of industries are clustered between 0.1 and 1.0 percent. If we exclude the impact of the pandemic in 2020, 61 manufacturing industries had positive total factor productivity growth from 1987-2019 compared to just 28 from 2018 to 2019. Only six industries had long-term trends change from positive growth in 1987-2019 to flat or negative values when the period was extended an additional year to 1987-2020. This sign change occurred in relatively few industries despite the large number of industries (39) with single-year total factor productivity declines of at least 2.0 percent in 2020. Between 1987 and 2020, the number of manufacturing industries with growth in total factor productivity was highest in 1992, 2003, and 2010. These were years of economic growth following recessions. In contrast, relatively few manufacturing industries saw total factor productivity growth in the recession years of 2001, 2009, and 2020. Average annual percent changes in total factor productivity by industry for sub periods between 1987 and 2020 are shown in table 3. The sub period from 1990 to 1995 saw the greatest number of manufacturing industries with total factor productivity growth. From 1987 to 2020, total factor productivity fell in air transportation by an average annual rate of 0.6 percent but rose in line-haul railroads by 1.3 percent. (See table 2.) Air transportation total factor productivity grew at an average annual rate 1.3 percent for the period prior to the pandemic, 1987-2019. This change in the long-term trend largely occurred because single-year output growth in air transportation went from a 4.0 percent increase in 2019 to a 60.4 percent decline in 2020. Similarly, single-year output in line-haul railroads deepened from a 3.6 percent decline in 2019 to fall 16.7 percent in 2020. However, this change had a smaller effect on the long-term trend of total factor productivity, which averaged 1.7 percent annually in the pre-pandemic 1987-2019 period compared to 1.3 percent from 1987-2020. Total Factor Productivity as a Source of Labor Productivity Growth Total factor 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 industrys labor productivity is equal to total factor 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 inputs relative to hours worked. These factor substitutions are referred to as contribution of capital intensity and contribution of intermediate inputs intensity. Seventy-nine out of the 86 manufacturing industries posted gains in labor productivity from 1987 to 2020. Among these industries, substitution of intermediate inputs for labor was the leading source of labor productivity growth. (See table 4.) 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 inputs intensity may also rise when firms substitute contracted labor for payroll labor. Between 2000 and 2007, total factor productivity growth was the predominant source of labor productivity growth in the manufacturing industries. In contrast, labor productivity growth was driven mostly by contribution of intermediate inputs intensity in the other two sub periods. Strong growth in total factor productivity was the dominant source of labor productivity growth in industries that manufacture computers and electronic products (computer and peripheral equipment, semiconductors and electronic components, and audio and video equipment) and line-haul railroads. The remaining manufacturing industries with high average annual growth in labor productivity were mostly fueled by the contribution of intermediate inputs intensity. Over the long-term period of 1987-2019 that excludes the pandemic, 12 of the 14 industries with the greatest average labor productivity growth are the same as those in the 1987-2020 period. Both industries that fell out of this group, air transportation and railroad rolling stock, had large declines in labor productivity in 2020: -56.5 percent in air transportation and -16.2 in railroad rolling stock. Additional Information More information about the North American Industry Classification System (NAICS) can be found at www.census.gov/naics/. Access the productivity data dashboard at www.bls.gov/productivity/tables/labor-productivity-detailed-industries.xlsx for Additional industries and sectors Detailed data series: indexes of total factor productivity and related measures; rates of change; and levels of industry employment, hours worked, nominal value of production, and labor compensation Additional years and long-term data More information from the BLS Productivity program is available at www.bls.gov/productivity/. 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