Transmission of material in this release is embargoed until                                  USDL 20-2032
8:30 a.m. (ET) Thursday, November 5, 2020

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Media contact:          (202) 691-5902 •  PressOffice@bls.gov


                                     PRODUCTIVITY AND COSTS 
                                Third Quarter 2020, Preliminary

Nonfarm business sector labor productivity increased 4.9 percent in the third quarter of 2020, the 
U.S. Bureau of Labor Statistics reported today, as output increased 43.5 percent and hours worked 
increased 36.8 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 4.9-percent gain in productivity in the third quarter was the second consecutive large increase in the 
measure--productivity had increased 10.6 percent in the second quarter of 2020. With the exception of 
the second quarter, productivity growth in the third quarter of 2020 was the largest quarterly increase 
since the fourth quarter of 2009 (5.7 percent). The two-quarter growth rate observed during the second 
and third quarters of 2020 (7.7 percent) is the highest rate of productivity growth over two quarters since 
the third and fourth quarters of 1965 (7.8 percent). Over the last four quarters, nonfarm business 
productivity increased 4.1 percent. (See table A1.)

Unit labor costs in the nonfarm business sector decreased at an annual rate of 8.9 percent in the third 
quarter of 2020, reflecting a 4.4-percent decrease in hourly compensation and a 4.9 percent increase in 
productivity. The third-quarter decline in unit labor costs was the largest decline since the first quarter
of 2009, when the measure fell 13.4 percent. Unit labor costs increased 2.5 percent over the last four 
quarters. (See table 2.) 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.

A decline of 9.1 percent in real hourly compensation in the third quarter of 2020 was the largest decline 
in the series, and reflects the combination of a 4.4-percent decline in hourly compensation and a large 
increase in the BLS consumer price index series for the third quarter of 5.2 percent at an annual rate. 
The decline in real hourly compensation in the third quarter was preceded by a series-high quarterly 
increase of 24.4 percent in the second quarter of 2020.

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 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; these were the largest declines in both 
series which begin in the first quarter of 1947. In contrast, the 4.9-percent increase in productivity in 
third-quarter 2020 reflected the largest gains in the output and hours series, with output increasing 43.5 
percent and hours increasing 36.8 percent. Although gains were historically large, the third-quarter 2020 
output and hours worked index levels remain below their fourth quarter of 2019 levels, the last quarter 
before the coronavirus (COVID-19) pandemic began. Specifically, output remains 4.0 percent below its 
fourth-quarter 2019 level, recovering somewhat faster than hours worked, which remains 7.5 percent 
lower. 

Manufacturing sector labor productivity increased at a 19.0 percent annual rate in the third quarter of 
2020. This is the largest increase in the series, which begins in the first quarter of 1987. Manufacturing 
output increased at a series-high 54.8 percent annual rate and hours worked increased at a series-high 
30.1 percent annual rate in the third quarter of 2020. The increase in total manufacturing productivity 
was concentrated in durable goods manufacturing, where productivity increased 44.2 percent as output 
grew 96.0 percent and hours worked rose 35.9 percent. In the nondurable goods manufacturing sector, 
productivity increased 1.2 percent as output and hours worked increased 22.7 percent and 21.2 percent, 
respectively. (See tables A1, 3, 4 and 5.) Total manufacturing sector productivity increased 0.7 percent 
over the last four quarters, as output decreased 6.1 percent and hours worked decreased 6.8 percent. (See 
tables A1 and 3.) 

Unit labor costs in the total manufacturing sector decreased 18.2 percent in the third quarter of 2020, the 
largest decline since the first quarter of 1993, when the measure fell 19.8 percent. The third-quarter 
decrease followed a 28.4-percent increase in unit labor costs in the second quarter of 2020, the largest 
increase in the series. Unit labor costs increased 3.8 percent from the same quarter a year ago. (See table 
A1.) 

The unprecedented increases in total manufacturing productivity, output, and hours in the third quarter 
of 2020 followed the largest decreases in these three measures in the second quarter of 2020, in which 
total manufacturing productivity fell 14.3 percent, output dropped 46.7 percent, and hours worked fell 
37.8 percent. Although there were historically large increases in the third quarter, the total 
manufacturing output and hours index levels did not recover to their fourth quarter of 2019 levels--the 
last quarter before the coronavirus (COVID-19) pandemic began. Output remained 6.0 percent below its 
fourth-quarter 2019 level, while hours worked was 6.9 percent lower. (See table 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. 

Revised measures        

Revised and previous measures for the second quarter of 2020 are shown in tables A2 and B1, covering 
the following major sectors: nonfarm business, business, manufacturing, and nonfinancial corporations.

In the second quarter of 2020, nonfarm business sector productivity increased 10.6 percent, slightly 
more than reported on September 3, and the largest increase since the first quarter of 1971, when the 
measure rose 12.3 percent. Unit labor costs increased 8.5 percent during the second quarter, slightly 
less than previously reported. (See table B1.)

Manufacturing sector productivity fell 14.3 percent in the second quarter; this was a slightly smaller 
decline than previously reported, though still the largest decline in this series. Durable manufacturing 
productivity was not revised, falling at the same 26.9 percent rate previously reported--the largest decline 
in the series. Nondurable manufacturing productivity was revised upward to a decline of 4.4 percent. Unit 
labor costs in total manufacturing increased 28.4 percent in the second quarter, rather than increasing 
29.1 percent as reported September 3, and still represented the series-high value after revision.

Second-quarter 2020 measures of productivity and costs were revised for the nonfinancial corporate 
sector. Productivity increased 2.9 percent rather than increasing 3.1 percent as previously reported. 
Unit labor costs increased 23.5 percent rather than the preliminary estimate of a 23.3-percent increase. 
(See table A2.)

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





=========================================================================================================================
Table A1. 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
-------------------------------------------------------------------------------------------------------------------------
Nonfarm business        Previous quarter            4.9         43.5     36.8      -4.4            -9.1          -8.9
                        A year ago                  4.1         -3.4     -7.2       6.7             5.3           2.5
                        
Business                Previous quarter            6.4         43.7     35.1      -3.3            -8.1          -9.1
                        A year ago                  4.3         -3.2     -7.2       6.7             5.4           2.4
                        
Manufacturing           Previous quarter           19.0         54.8     30.1      -2.6            -7.4         -18.2
                        A Year ago                  0.7         -6.1     -6.8       4.6             3.3           3.8
 Durable                                                                                                         
 manufacturing          Previous quarter           44.2         96.0     35.9      -3.0            -7.8         -32.8
                        A year ago                  0.4         -7.4     -7.8       4.5             3.2           4.1
 Nondurable
 manufacturing          Previous quarter            1.2         22.7     21.2      -2.8            -7.5          -4.0
                        A year ago                  0.5         -4.6     -5.0       5.0             3.7           4.6
=========================================================================================================================


=========================================================================================================================
Table A2. 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
-------------------------------------------------------------------------------------------------------------------------       
Nonfinancial             Revised                   2.9         -39.4     -41.1      27.1            31.8         23.5
corporate          Previously published            3.1         -39.3     -41.1      27.1            31.7         23.3
=========================================================================================================================


=========================================================================================================================
Table B1. 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      20.0            24.4          8.5
                   Previously published            10.1        -37.1     -42.9      20.0            24.4          9.0
                        
Business                Revised                     9.6        -36.8     -42.4      19.4            23.7          8.9
                   Previously published             8.9        -37.2     -42.3      19.3            23.7          9.6
                        
Manufacturing           Revised                   -14.3        -46.7     -37.8      10.1            14.1         28.4
                   Previously published           -14.6        -47.0     -38.0      10.3            14.4         29.1

 Durable                Revised                   -26.9        -57.8     -42.3       8.8            12.8         48.8
 manufacturing     Previously published           -26.9        -57.9     -42.4       9.1            13.1         49.2
                        
 Nondurable             Revised                    -4.4        -32.9     -29.8      14.6            18.8         19.9
 manufacturing     Previously published            -5.1        -33.5     -30.0      14.6            18.8         20.7
=========================================================================================================================