Technical notes



                                      TECHNICAL NOTES

Labor Hours

Hours data for the labor productivity and cost measures include hours worked for all persons 
working in the sectorówage and salary workers, the self-employed and unpaid family workers. 
The primary source of hours and employment data is the BLS Current Employment Statistics 
(CES) program, which provides monthly survey data on the number of jobs held by wage and 
salary workers in nonfarm establishments, counting a person who is employed by two or more 
establishments at each place of employment. The CES also provides average weekly paid hours 
of production and nonsupervisory workers in these establishments. Weekly paid hours are 
adjusted to hours worked using data from the National Compensation Survey (NCS) for 1996 
forward and data from the BLS Hours at Work survey, conducted for this purpose, prior to 1990. 
Between 1990 and 1995, weekly paid hours are adjusted to hours at work using a combination of 
NCS and Hours at Work survey data. The Office of Productivity and Technology estimates 
average weekly hours at work for nonproduction and supervisory workers using information 
from the Current Population Survey (CPS), the CES, and the NCS.

Data from the CPS are used to estimate hours worked for farm labor, nonfarm proprietors, and 
nonfarm unpaid family workers. Using CPS information on employment and hours worked at 
primary jobs and all other jobs, separately, the BLS productivity measures assign all hours 
worked to the appropriate industrial sector. Hours for government enterprises are derived from 
the CPS, the CES, and the National Income and Product Accounts (NIPA) prepared by the 
Bureau of Economic Analysis (BEA) of the Department of Commerce.

Output

Business sector output is a chain-type, current-weighted index constructed after excluding from 
gross domestic product (GDP) the following outputs: general government, nonprofit institutions, 
and private households (including owner-occupied housing). Corresponding exclusions also are 
made in labor hours. Business output accounted for about 76 percent of the value of GDP in 
2017. Nonfarm business, which excludes farming, accounted for about 75 percent of GDP in 
2017.

Annual indexes for manufacturing and its durable and nondurable goods components are 
constructed by deflating current-dollar industry value of production data from the U.S. Bureau of 
the Census with deflators from the BLS. These deflators are based on data from the BLS 
Producer Price Index program and other sources. The industry shipments are aggregated using 
annual weights, and intrasector transactions are removed. Quarterly manufacturing output 
measures are based on the indexes of industrial production prepared monthly by the Board of 
Governors of the Federal Reserve System, adjusted to be consistent with annual indexes of 
manufacturing sector output prepared by BLS. 

Nonfinancial corporate output is a chain-type, current-weighted index calculated on the basis of 
the costs incurred and the incomes earned from production.  The output measure excludes the 
following outputs from GDP: general government; nonprofit institutions; private households; 
unincorporated business; and those corporations classified as offices of bank holding companies, 
offices of other holding companies, or offices in the finance and insurance sector. Nonfinancial 
corporations accounted for about 49 percent of the value of GDP in 2017. 
     
Labor Productivity

The measure describes the relationship between real output and the labor time involved in its 
production. Measures of labor productivity growth show the changes from period to period in the 
amount of goods and services produced per hour worked. They reflect the joint effects of many 
influences, including changes in technology; capital investment; level of output; utilization of 
capacity, energy, and materials; the organization of production; managerial skill; and the 
characteristics and effort of the work force.


Labor Compensation

The measure includes accrued wages and salaries, supplements, employer contributions to 
employee benefit plans, and taxes. Estimates of labor compensation by major sector, required for 
measures of hourly compensation and unit labor costs, are based primarily on employee 
compensation data from the NIPA, prepared by the BEA. The compensation of employees in 
general government, nonprofit institutions and private households are subtracted from 
compensation of employees in domestic industries to derive employee compensation for the 
business sector. The labor compensation of proprietors cannot be explicitly identified and must 
be estimated. This is done by assuming that proprietors have the same hourly compensation as 
employees in the same sector. The quarterly labor productivity and cost measures do not contain 
estimates of compensation for unpaid family workers.  
      
Unit Labor Costs

These measures describe the relationship between compensation per hour and labor productivity, 
or real output per hour, and can be used as an indicator of inflationary pressure on producers. 
Increases in hourly compensation increase unit labor costs; labor productivity increases offset 
compensation increases and lower unit labor costs. 

Presentation of the data

The quarterly data in this release are presented in three ways: as percent changes from the 
previous quarter presented at a compound annual rate, as percent changes from the 
corresponding quarter of the previous year, and as index number series where 2009=100. Annual 
data are presented both as index number series and percent changes from the previous year.  

The index numbers and rates of change reported in the productivity and costs news release are 
rounded to one decimal place. All percent changes in this release and on the BLS web site are 
calculated using index numbers to three decimal places. A complete historical series of these 
index numbers are available at the BLS web site, www.bls.gov/data/home.htm, or by contacting 
the BLS Division of Major Sector Productivity (Telephone 202-691-5606 or email 
productivity@bls.gov).

For a more detailed explanation of methodology see "Technical Information About the Major 
Sector Productivity and Costs Methods" at www.bls.gov/lpc/lpcmethods.pdf.
      
Information in this release will be made available to sensory-impaired individuals upon request. 
Voice phone: 202-691-5200; Federal Relay Service number: 1-800-877-8339.

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Last Modified Date: June 06, 2018