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 2012=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: November 01, 2018