For release 10:00 a.m. (ET) Thursday, August 26, 2021 USDL-21-1545 Technical Information: (202) 691-5606 • email@example.com • www.bls.gov/mfp Media Contact: (202) 691-5902 • PressOffice@bls.gov MULTIFACTOR PRODUCTIVITY TRENDS FOR DETAILED INDUSTRIES - 2019 Multifactor productivity–defined as output per unit of combined inputs--fell in 61 of the 86 4-digit NAICS manufacturing industries in 2019, the U.S. Bureau of Labor Statistics reported today. In 2018 multifactor productivity decreased in 37 manufacturing industries. Among transportation industries, multifactor productivity increased in air transportation and decreased in line-haul railroads. Eight of the nine largest 4-digit NAICS manufacturing industries (those with employment over 350,000) had decreasing multifactor productivity in 2019. Only the aerospace products and parts industry had rising multifactor productivity. Output fell or was unchanged from 2018 in all nine industries, with the largest decline occurring in printing and related support activities (-5.7 percent). A rise in combined inputs paired with falling or flat output resulted in declining multifactor productivity for five of the nine industries. Among all 86 manufacturing industries, 3 industries posted multifactor productivity gains greater than 5.0 percent (see table 1): * Leather and hide tanning and finishing (+8.8 percent) * Apparel knitting mills (+5.4 percent) * Computer and peripheral equipment (+5.3 percent) Multifactor productivity declined by 7.0 percent or more in 3 manufacturing industries in 2019: * Other leather products (-8.3 percent) * Magnetic media manufacturing and reproducing (-7.8 percent) * Resin, rubber, and artificial fibers (-7.2 percent) Multifactor productivity increased in one of the two measured transportation industries: * Air transportation (+0.9 percent) * Line-haul railroads (-1.9 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. See the technical note for more information. Components of Multifactor Productivity Growth: Output and Combined Inputs In 2019, output increased in 13 of 86 manufacturing industries, compared to 53 industries in 2018. Output increased by 3.0 percent or more in the following 5 industries in 2019: * Soaps, cleaning compounds, and toiletries (+5.3 percent) * Other textile product mills (+4.9 percent) * Other food products (+4.5 percent) * Cut and sew apparel (+3.3 percent) * Electrical equipment (+3.2 percent) Combined inputs of capital, labor, and intermediate purchases rose in 32 of 86 manufacturing industries in 2019, compared to 55 industries in 2018. Nearly half of the manufacturing industries saw growth in hours worked and capital services (38 industries each) and intermediate purchases (36 industries). The following industries had the largest increases in combined inputs in 2019: * Animal slaughtering and processing (+4.3 percent) * Ship and boat building (+4.0 percent) * Boilers, tanks, and shipping containers (+3.8 percent) * Other leather products (+3.1 percent) * Electronic instruments (+3.0 percent) In 2 manufacturing industries, multifactor productivity rose more than 5.0 percent despite falling output as combined inputs fell more rapidly. This occurred in: * Leather and hide tanning and finishing (+8.8 percent) * Apparel knitting mills (+5.4 percent) In the air transportation industry, output increased 4.0 percent and combined inputs increased 3.1 percent in 2019. In line-haul railroads, output declined 3.6 percent and combined inputs declined 1.7 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 2019, multifactor productivity grew in 60 manufacturing industries, compared to only 25 from 2018 to 2019. (See tables 1 and 2.) 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 42 industries in 2019. No industry saw an average annual decline of that magnitude from 1987 to 2019. Between 1987 and 2019, 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. Average annual percent changes in multifactor productivity by industry for sub periods between 1987 and 2019 are shown in table 3. The sub period from 1990 to 1995 saw the greatest number of manufacturing industries with multifactor productivity growth. From 1987 to 2019, multifactor productivity rose in both air transportation and line-haul railroads by an average annual rate of 1.3 percent and 1.7 percent, respectively. While both industries posted gains in output, multifactor productivity grew more in line-haul railroads because its combined inputs showed little change over the long term. (See table 2.) 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 2019. Among these industries, substitution of intermediate purchases 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 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, and audio and video equipment). Labor productivity growth in the two transportation industries, air transportation and line-haul railroads, 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. Terminology Change for Multifactor Productivity Data The BLS Productivity Program will replace the term multifactor productivity (MFP) with total factor productivity (TFP) beginning in the fourth quarter of 2021. This is a change in terminology only and will not affect the data or methodology. The use of the term total factor productivity will improve the visibility and accessibility of our data and will be accompanied by changes to the BLS website and future productivity news releases. Additional Information The combined inputs measures for manufacturing industries in this release incorporate new data from the BLS International Price Program. Prices for imported materials are a component of intermediate purchases, and these prices are now more comprehensive and cover the entire history of the series. Accordingly, the multifactor productivity and combined inputs series for manufacturing industries have been revised for 2018 and all earlier years. The combined inputs measure for line-haul railroads in this release incorporates additional data from the United States Surface Transportation Board (STB). The quantity of leased rail cars, which is a component of intermediate purchases, is reported in Schedule 710 of the annual STB reports of U.S. Class I railroads. Accordingly, the multifactor productivity and combined inputs series for line-haul railroads have been revised for 2018 and all earlier years. The COVID-19 pandemic did not impact the availability of source data used to construct the productivity measures in this release. Additional information can be found on the BLS website at https://www.bls.gov/covid19/effects-of-covid-19-pandemic-on-productivity-and-costs- statistics.htm#Multifactor-Productivity. 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://public.govdelivery.com/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.