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Economic News Release
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Productivity and Costs, Third Quarter 2020, Revised



Transmission of material in this release is embargoed until                                 USDL 20-2215
8:30 a.m. (ET) Tuesday, December 8, 2020

Technical information: (202) 691-5606   Productivity@bls.gov  www.bls.gov/lpc
Media contact:         (202) 691-5902   PressOffice@bls.gov    

                                          PRODUCTIVITY AND COSTS 
                                        Third Quarter 2020, Revised

Nonfarm business sector labor productivity increased 4.6 percent in the third quarter of 2020, the 
U.S. Bureau of Labor Statistics reported today, as output increased 43.4 percent and hours worked 
increased 37.1 percent. (All quarterly percent changes in this release are seasonally adjusted annual 
rates, and show what the percent change would be if the quarterly rate continued for four quarters.) The 
4.6-percent gain in productivity in the third quarter follows an increase of 10.6 percent during the second 
quarter. Over the last four quarters, nonfarm business productivity increased 4.0 percent, reflecting a 
3.4-percent decline in output and a 7.1-percent decline in hours worked. (See table A1.)

Unit labor costs in the nonfarm business sector decreased at an annual rate of 6.6 percent in the third 
quarter of 2020, the combined effect of a 2.3-percent decrease in hourly compensation and the 4.6-
percent increase in productivity. The third-quarter decline in unit labor costs followed three consecutive 
quarterly increases, and nonfarm business unit labor costs increased 4.0 percent over the last four 
quarters. (See table 2.) 

Labor productivity, or output per hour, is calculated by dividing an index of real output by an index of 
hours worked by all persons, including employees, proprietors, and unpaid family workers. The 4.6-
percent increase in productivity in third-quarter 2020 results from the largest gains in both the output 
(43.4 percent) and the hours worked (37.1 percent) series, which begin in 1947. In contrast, the 10.6-
percent gain in nonfarm business labor productivity in second-quarter 2020 reflected a decline in output 
of 36.8 percent and a decline in hours worked of 42.9 percent--the largest declines in both series.
Overall, the output and hours worked index levels remain below their levels in the fourth quarter of 
2019, the last quarter before the coronavirus (COVID-19) pandemic began. Output and hours worked 
remain 4.0 percent and 7.4 percent below their fourth-quarter 2019 levels, respectively.

Manufacturing sector labor productivity increased at a 19.9 percent annual rate in the third quarter of 
2020 as output increased at a 56.2 percent annual rate and hours worked increased at a 30.3 percent 
annual rate. These series-high increases in the third quarter of 2020 follow the largest decreases in these 
three measures in the second quarter, when total manufacturing productivity fell 14.0 percent, output 
dropped 46.5 percent, and hours worked fell 37.8 percent. As of the third quarter of 2020, output 
remains 5.7 percent below its fourth-quarter 2019 index level, while hours worked is 6.8 percent lower. 
(See table 3.) 

Durable goods manufacturing was responsible for the majority of the 19.9-percent total manufacturing 
productivity increase, as it saw an increase in productivity of 47.0 percent, reflecting a 99.8-percent 
increase in output and a 35.9-percent increase in hours worked. The sharp increase in durable 
manufacturing output in the third quarter was driven by motor vehicle production. Nondurable goods 
manufacturing productivity increased 0.7 percent in the third quarter of 2020, as output increased 22.6 
percent and hours worked increased 21.8 percent. (See tables A1, 4, and 5.)

Unit labor costs in the total manufacturing sector decreased 12.1 percent in the third quarter of 2020, the 
largest decline since the first quarter of 2010, when the measure fell 13.0 percent. The third-quarter 
decrease followed a 44.8-percent increase in unit labor costs in the second quarter of 2020, the largest 
increase in the series. Unit labor costs increased 8.9 percent from the same quarter a year ago. Total 
manufacturing sector productivity increased 1.0 percent over the last four quarters, as output decreased 
5.8 percent and hours worked decreased 6.7 percent.  (See tables A1 and 3.)

The concepts, sources, and methods used for the manufacturing output series differ from those used in 
the business and nonfarm business output series; these output measures are not directly comparable. See 
the Technical Notes for a more detailed explanation. 

Preliminary third-quarter 2020 measures were announced today for the nonfinancial corporate sector. 
Productivity increased 0.8 percent in the third quarter of 2020 as output and hours worked increased 
33.3 percent and 32.3 percent, respectively. These were the largest increases in both output and hours 
worked since the series began in the first quarter of 1947. In contrast, the 4.8-percent increase in second 
quarter 2020 productivity reflected the largest declines in the output and hours series, with output 
decreasing 38.3 percent and hours worked decreasing 41.1 percent. Output remains 5.7 percent below 
the fourth quarter 2019 level, while hours worked remains 7.1 percent lower. Productivity increased 1.7 
percent in the nonfinancial corporate sector over the last four quarters. Unit profits of nonfinancial 
corporations increased at a 220.5 percent annual rate in the third quarter of 2020--the largest increase in 
the series starting in the first quarter of 1947--and increased 17.1 percent over the last four quarters. (See 
tables A2 and 6.)

Revised measures        

Measures released today are based on more recent source data than were available for the preliminary 
report. Regular updates of source data from the BLS, the Bureau of Economic Analysis (BEA), and the 
Board of Governors of the Federal Reserve System are reflected in data for the second and third quarters 
of 2020. Measures of output for the manufacturing sectors incorporate revised annual benchmark data 
from 1987 to 2018 released November 19 by BLS; resulting revisions to percent changes are small.

Table B1 presents revised and previously published productivity and related measures for the nonfarm 
business, business, and manufacturing sectors for the third quarter of 2020. 

In the third quarter of 2020, nonfarm business labor productivity increased 4.6 percent rather than the 
preliminary estimate of an increase of 4.9 percent, reflecting a 0.1-percentage point downward revision 
to output and a 0.3-percentage point upward revision to hours worked. Unit labor costs were revised up 
2.3 percentage points due primarily to a 2.1-percentage point upward revision to hourly compensation. 

In the manufacturing sector, productivity increased 19.9 percent rather than 19.0 percent as previously 
reported, reflecting a 1.4-percentage point upward revision to output and a 0.2-percentage point upward 
revision to hours worked. Durable manufacturing productivity increased 47.0 percent rather than 
increasing 44.2 percent as previously reported, reflecting a 3.8-percentage point upward revision to 
output; hours worked were unrevised. Nondurable manufacturing productivity was revised down to an 
increase of 0.7 percent rather than an increase of 1.2 percent as previously reported, due to a 0.1-
percentage point downward revision to output and a 0.6-percentage point upward revision to hours 
worked. Total manufacturing unit labor costs were revised up 6.1 percentage points to a decrease of 12.1 
percent, as a 7.9-percentage point upward revision to hourly compensation was partially offset by the 
0.9-percentage point upward revision to productivity. BLS calculates unit labor costs as the ratio of 
hourly compensation to labor productivity. Increases in hourly compensation tend to increase unit labor 
costs, and increases in labor productivity tend to reduce unit labor costs.     

Table B2 shows revised and previously published productivity and related measures for the nonfarm 
business, business, manufacturing, and nonfinancial corporate sectors for the second quarter of 2020.

In the second quarter of 2020, labor productivity, output, and hours worked were unrevised for the 
nonfarm business sector. Unit labor costs increased 12.3 percent, rather than increasing 8.5 percent as 
previously reported, due to a 4.3-percentage point upward revision to hourly compensation. 

In the manufacturing sector, productivity was revised up 0.3 percentage point to a decrease of 14.0 
percent, due to an upward revision to output; hours worked were unrevised. Unit labor costs were 
revised up to an increase of 44.8 percent rather than the previously reported increase of 28.4 percent. 
This large revision is mainly due to a 14.4-percentage point upward revision to hourly compensation.

In the nonfinancial corporate sector, productivity increased 4.8 percent rather than 2.9 percent as 
previously reported, due solely to a 1.1-percentage point upward revision to output; hours worked were 
unrevised. Unit labor costs were revised up 1.2 percentage points to an increase of 24.7 percent, 
reflecting a 1.9-percentage point upward revision to labor productivity and a 3.6-percentage point 
upward revision to hourly compensation.

Complete annual and quarterly data series can be found on the Productivity and Costs home page: 
www.bls.gov/lpc/#data.
______________
The preliminary Productivity and Costs news release for fourth-quarter and annual averages 2020 
is scheduled to be released on Thursday, February 4, 2021 at 8:30 a.m. (ET).

=========================================================================================================================
Calendar year 2021 release dates for Productivity and Costs news releases are now available at 
www.bls.gov/schedule/news_release/prod2.htm.
=========================================================================================================================


=========================================================================================================================
                                 Upcoming Methodology Change
                                 
Beginning with the Productivity and Costs news release scheduled for March 4, 2021, BLS will 
extend methodology improvements made since release of first-quarter 2020 data to the remaining 
seasonally adjusted CPS series used by the major sector labor productivity program. Several prior 
years of hours worked data and related measures will be revised.

Previously, BLS improved seasonal adjustment of CPS data on hours worked by the nonfarm self-
employed and all farm workers to account for extreme values in March and April due to the impact of 
the COVID-19 pandemic. Seasonal adjustment software was updated from X12ARIMA to 
X13ARIMA-SEATS from the U.S. Census Bureau. This same methodology change will be used for 
the remaining seasonally adjusted CPS series beginning with the revised fourth-quarter 2020 data.
=========================================================================================================================


=========================================================================================================================
Table A1. Labor productivity growth and related measures  revised third-quarter 2020
(percent change  from previous quarter at annual rate and from same quarter a year ago)


                                                Labor                   Hours    Hourly         Real hourly    Unit labor
Sector                  Percent change from:    productivity   Output   worked   compensation   compensation   costs
-------------------------------------------------------------------------------------------------------------------------
Nonfarm business           Previous quarter         4.6         43.4     37.1       -2.3            -7.1        -6.6
                           A year ago               4.0         -3.4     -7.1        8.2             6.8         4.0

Business                   Previous quarter         6.0         43.6     35.5       -1.2            -6.1        -6.8
                           A year ago               4.2         -3.2     -7.1        8.2             6.9         3.9

Manufacturing              Previous quarter        19.9         56.2     30.3        5.3             0.2       -12.1
                           A year ago               1.0         -5.8     -6.7       10.0             8.6         8.9

  Durable manufacturing    Previous quarter        47.0         99.8     35.9        7.4             2.2       -26.9
                           A year ago               0.8         -7.0     -7.8       11.1             9.7        10.2

  Nondurable manufacturing Previous quarter         0.7         22.6     21.8        0.3            -4.7        -0.4
                           A year ago               0.5         -4.5     -4.9        8.1             6.8         7.6
=========================================================================================================================


=========================================================================================================================
Table A2. Labor productivity growth and related measures  preliminary third-quarter 2020
(percent change from previous quarter at annual rate and from same quarter a year ago)


                                                Labor                   Hours    Hourly         Real hourly    Unit labor
Sector                   Percent change from:   productivity   Output   worked   compensation   compensation   costs
-------------------------------------------------------------------------------------------------------------------------
Nonfinancial corporate   Previous quarter           0.8         33.3     32.3       -3.0            -7.8        -3.8
                         A year ago                 1.7         -5.1     -6.8        8.9             7.5         7.0
=========================================================================================================================


=========================================================================================================================
Table B1. Labor productivity growth and related measures  revised and previously published third-quarter 2020
(percent change from previous quarter at annual rate) 


                                                Labor                   Hours    Hourly         Real hourly    Unit labor
Sector                                          productivity   Output   worked   compensation   compensation   costs
-------------------------------------------------------------------------------------------------------------------------
Nonfarm business            Revised                 4.6         43.4     37.1       -2.3            -7.1         -6.6
                            Previously published    4.9         43.5     36.8       -4.4            -9.1         -8.9

Business                    Revised                 6.0         43.6     35.5       -1.2            -6.1         -6.8
                            Previously published    6.4         43.7     35.1       -3.3            -8.1         -9.1

Manufacturing               Revised                19.9         56.2     30.3        5.3             0.2        -12.1
                            Previously published   19.0         54.8     30.1       -2.6            -7.4        -18.2

  Durable manufacturing     Revised                47.0         99.8     35.9        7.4             2.2        -26.9
                            Previously published   44.2         96.0     35.9       -3.0            -7.8        -32.8

  Nondurable manufacturing  Revised                 0.7         22.6     21.8        0.3            -4.7         -0.4
                            Previously published    1.2         22.7     21.2       -2.8            -7.5         -4.0
=========================================================================================================================


=========================================================================================================================
Table B2. Labor productivity growth and related measures  revised and previously published second-quarter 2020
percent change from previous quarter at annual rate) 


                                                Labor                   Hours    Hourly         Real hourly    Unit labor
Sector                                          productivity   Output   worked   compensation   compensation   costs
-------------------------------------------------------------------------------------------------------------------------
Nonfarm business            Revised                10.6        -36.8    -42.9       24.3            28.8         12.3
                            Previously published   10.6        -36.8    -42.9       20.0            24.4          8.5

Business                    Revised                 9.6        -36.8    -42.4       23.5            28.1         12.7
                            Previously published    9.6        -36.8    -42.4       19.4            23.7          8.9

Manufacturing               Revised               -14.0        -46.5    -37.8       24.5            29.0         44.8
                            Previously published  -14.3        -46.7    -37.8       10.1            14.1         28.4

  Durable manufacturing     Revised               -26.9        -57.8    -42.3       25.6            30.2         71.9
                            Previously published  -26.9        -57.8    -42.3        8.8            12.8         48.8

  Nondurable manufacturing  Revised                -3.8        -32.5    -29.8       24.7            29.2         29.6
                            Previously published   -4.4        -32.9    -29.8       14.6            18.8         19.9

Nonfinancial corporate      Revised                 4.8        -38.3    -41.1       30.7            35.4         24.7
                            Previously published    2.9        -39.4    -41.1       27.1            31.8         23.5
=========================================================================================================================

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Last Modified Date: December 08, 2020