Multifactor productivity trends, 2017

For release 10:00 am (EDT) March 21, 2018	USDL-18-0452
Technical information:	(202) 691-5606  •  mfpweb@bls.gov  •  www.bls.gov/mfp
Media contact:	        (202) 691-5902  •  PressOffice@bls.gov 

MULTIFACTOR PRODUCTIVITY TRENDS – 2017 

Private nonfarm business sector multifactor productivity increased 0.9 percent
in 2017, the U.S. Bureau of Labor Statistics reported today. (See chart 1, 
table A.) This 2017 increase reflects a 2.9-percent increase in output and 
a 2.0-percent increase in the combined inputs of capital and labor. Capital
services grew by 2.2 percent and labor input–which is the combined effect 
of hours worked and labor composition–grew by 1.9 percent. The increase in
multifactor productivity followed a 0.6-percent decrease in 2016. 
(See table 1.)

Multifactor productivity is calculated by dividing an index of real output
by an index of combined units of labor input and capital services. 
Multifactor productivity annual measures differ from BLS quarterly labor 
productivity (output per hour worked) measures because the former also 
includes the influences of capital services and shifts in the composition 
of the workforce. Measures for the most recent year of this release are
preliminary estimates. See the Technical Notes for additional information.

Private business sector multifactor productivity increased at a 0.8-percent
annual rate in 2017. A 2.7-percent increase in output outpaced a 2.0-percent
increase in the combined inputs of capital and labor in 2017. 
(See table A, table 2.)
 
2017 Multifactor Productivity Trends

Multifactor productivity in the private nonfarm business sector grew at
an average annual rate of 0.8 percent from 1987 to 2017. For the 2007-17 
period, multifactor productivity grew at an average annual rate of 0.5 percent
as combined inputs increased 1.1 percent and output increased 1.6 percent. 
The increase in combined inputs reflected a 1.7-percent average annual percent
increase in capital services along with an 0.8-increase in labor input. 
(See table A.)

In the 2007-17 period, labor productivity decelerated to an average annual 
rate of 1.2 percent, as compared to the average annual rate of 2.7 percent 
in the 2000-07 period. Labor productivity growth can be viewed as the sum 
of three components: multifactor productivity growth, the contribution of 
capital intensity, and the contribution of shifts in labor composition. 

Between the 2000-07 and 2007-17 periods, labor productivity growth declined
1.5 percentage points, reflecting a 1.2-percent slowdown in the growth of 
output. Additionally, the 2007-2017 period experienced decelerations in 
multifactor productivity growth, the contribution of capital intensity, 
and the contribution of labor composition. The contribution of capital 
intensity grew 0.5 percentage points in the 2007-2017 period, the slowest
growth, as viewed over the 1987-2017 sub periods. (See chart 2.) Multifactor
productivity increased 0.5 percentage points in the 2007-17 period compared 
to a growth rate of 1.4 percent in the 2000-07 period, a 0.9-percentage point
decline.  (See chart 2, table B.) The contributions of labor composition
slightly decelerated by 0.1 percentage points between the 2000-07 period
and the 2007-17 period, to 0.2 percent. (See chart 2, table B.) 

2015-16 Revisions

In 2016, the multifactor productivity growth rate in the private nonfarm
business sector was revised downward from an average annual rate of -0.2 
percent to an average annual rate of -0.6 percent due to a downward revision
to output of -0.2 percent and an upward revision to combined inputs of 
0.2 percent. In 2015, the multifactor productivity growth rate in the 
private nonfarm business sector was revised upward from an average annual
rate of 0.6 percent to an average annual rate of 0.9 percent due to revisions
in output. (See table D.)

2016 Capital Services 

The deceleration of capital services since 2000 is largely due to a
deceleration in the growth of equipment and intellectual property products.
The average annual rate of growth of equipment decelerated from the peak 
in the 1995-2000 period, from 9.1 percent to 2.2 percent in the more recent
2007-16 period.  The average annual rate of growth of intellectual property 
products decelerated from a peak of 8.4 percent in 1995-2000 to 3.2 percent
in 2007-16. (See chart 3, table C.)

Within equipment, growth in computers decelerated from a 13.5-percent average
annual rate in 2000-07 to 4.8 percent in 2007-16. (See chart 4, table C.) 
Within intellectual property products, software decelerated from a 7.7-percent
average annual rate of growth in 2000-07 period to 3.8 percent in 2007-16. 
(See chart 5, table C.) 

In 2016, the annual growth of computers decreased for the first time in the
series, to -0.1 percent. Computers steadily accelerated from 1992 to 1999. 
From 2008 forward, the annual growth in computers steadily slowed until the
2016 decline of -0.1 percent. Communications equipment is defined as 
telecommunication parts and equipment that send and receive information. From 
1994 to 2000, communications equipment annual growth steadily accelerated.
After reaching a peak of 14.7-percent annual growth in 2000, growth has 
slowed but remains positive in communication equipment. Starting in 2012, 
the annual growth in communication equipment began to outpace the annual 
growth in computers for the first time in the series. (See chart 6.) 
 
Table A.   Productivity, output, and inputs in the private nonfarm business
and private business sectors for selected periods,1987-2017

Compound annual growth rates


                              1987- 1987- 1990- 1995- 2000- 2007- 2015- 2016-
                              2017  1990  1995  2000  2007  2017  2016  2017

Private nonfarm business1

Productivity
  Multifactor Productivity2    0.8   0.5   0.4   1.3   1.4   0.5  -0.6   0.9
  Labor productivity3          1.9   1.4   1.7   2.7   2.7   1.2   0.0   1.2
  Output per unit of
    capital                   -0.5  -0.6  -0.6  -0.9  -0.5  -0.1  -1.1   0.6


Output                         2.8   3.2   3.0   5.0   2.8   1.6   1.5   2.9
Combined inputs4               2.0   2.8   2.5   3.7   1.4   1.1   2.1   2.0
   Labor input5                1.4   2.2   2.0   2.5   0.5   0.8   1.8   1.9
     Hours                     0.9   1.8   1.3   2.2   0.1   0.4   1.5   1.6
     Labor Composition6        0.4   0.4   0.7   0.3   0.4   0.4   0.3   0.3
   Capital services            3.3   3.9   3.5   6.0   3.3   1.7   2.5   2.2
Analytic ratio
   Capital intensity7          2.4   2.0   2.2   3.7   3.2   1.3   1.1   0.6


Private business1

Productivity
  Multifactor Productivity2    0.9   0.6   0.4   1.5   1.4   0.5  -0.5   0.8
  Labor productivity3          2.0   1.6   1.6   2.9   2.7   1.2   0.1   1.2
  Output per unit of
    capital                   -0.4  -0.5  -0.4  -0.7  -0.4  -0.1  -0.9   0.5


Output                         2.8   3.2   2.9   5.1   2.8   1.6   1.6   2.7
Combined inputs4               2.0   2.7   2.5   3.5   1.4   1.1   2.0   2.0
   Labor input5                1.3   2.1   2.1   2.4   0.5   0.8   1.8   1.8
     Hours                     0.9   1.6   1.3   2.1   0.1   0.4   1.5   1.5
     Labor Composition6        0.4   0.4   0.7   0.3   0.4   0.4   0.3   0.3
   Capital services            3.2   3.8   3.4   5.8   3.2   1.7   2.5   2.2
Analytic ratio
   Capital intensity7          2.3   2.1   2.0   3.7   3.2   1.3   1.0   0.7


1.  Excludes government enterprises.
2.  Output per combined units of labor input and capital services.
3.  Output per hour worked.
4.  The growth rate of each input is weighted by its share of current dollar
    costs.
5.  Hours at work by age, education, and gender group are weighted by each
    group’s share of total wages.
6.  Ratio of labor input to hours.
7.  Capital services per hour.

Table B.  Labor productivity and the contributions of capital intensity, labor
composition, and multifactor productivity to labor productivity in the private
nonfarm business and private business sectors for selected periods,1987-2017

Compound annual growth rates



                    1987- 1987- 1987- 1990- 1995- 2000- 2007- 2007- 2015- 2016-
                    2016  2017* 1990  1995  2000  2007  2016  2017* 2016  2017*

Private nonfarm 
   business1

Labor productivity2  1.9   1.9   1.4   1.7   2.7   2.7   1.2   1.2   0.0   1.2

Contribution of
capital intensity3   0.8   0.8   0.7   0.7   1.2   1.1   0.5   0.5   0.4   0.2

   Contribution of
   information 
   processing 
   equipment(IPE)4   0.3    NA   0.3   0.3   0.6   0.3   0.1    NA   0.1    NA

   Contribution of 
   research and
   development
   (R&D)5            0.1    NA   0.1   0.1   0.1   0.1   0.1    NA   0.1    NA

   Contribution of 
   intellectual 
   property 
   products (IPP)
   excluding R&D6    0.2    NA   0.2   0.2   0.3   0.3   0.1    NA   0.2    NA

   Contribution of 
   capital 
   services 
   excluding IPP
   and IPE           0.2    NA   0.1   0.2   0.2   0.4   0.2    NA   0.1    NA

Contribution of 
labor composition7   0.3   0.3   0.3   0.5   0.2   0.3   0.2   0.2   0.2   0.2

Multifactor 
productivity8        0.8   0.8   0.5   0.4   1.3   1.4   0.4   0.5  -0.6   0.9

  Contribution of 
  R&D to 
  multifactor 
  productivity 


Private business1

Labor productivity2  2.0   2.0   1.6   1.6   2.9   2.7   1.2   1.2   0.1   1.2

Contribution of
capital intensity3   0.8   0.8   0.7   0.7   1.2   1.1   0.5   0.5   0.4   0.3

   Contribution of
   information 
   processing 
   equipment(IPE)4   0.3    NA   0.3   0.3   0.6   0.3   0.1    NA   0.1    NA

   Contribution of 
   research and
   development
   (R&D)5            0.1    NA   0.1   0.1   0.1   0.1   0.1    NA   0.1    NA

   Contribution of 
   intellectual 
   property 
   products (IPP)
   excluding R&D6    0.2    NA   0.2   0.2   0.3   0.3   0.1    NA   0.2    NA

   Contribution of 
   capital 
   services 
   excluding IPP
   and IPE           0.2    NA   0.2   0.1   0.2   0.4   0.2    NA   0.1    NA

Contribution of 
labor composition7   0.3   0.3   0.3   0.5   0.2   0.3   0.2   0.2   0.2   0.2

Multifactor 
productivity8        0.9   0.9   0.6   0.4   1.5   1.4   0.5   0.5  -0.5   0.8

1. Excludes government enterprises.
2. Output per hour worked.
3. Capital services per hour multiplied by capital's share of current dollar
   costs.
4. Information processing equipment per hour multiplied by its share of current
   dollar costs.
5. Research and development per hout multiplied by its share of current dollar
   costs.
6. Software and artistic originals per hour multiplied by their share of
   current dollar costs.
7. Labor composition multiplied by labor's share of current dollar costs.
8. Output per unit of combined labor and capital services.
*  NA identifies where data for the most recent year are not available.

Note: Multifactor productivity plus contribution of capital intensity and
labor composition may not sum to output per hour due to independent
rounding. Contributions of the components of capital intensity may not
sum to the total contribution of capital intensity due to independent
rounding.

Table C. Real capital services by asset type in the private nonfarm business 
and private business sectors for selected periods, 1987-2016

Compound annual growth rates

                        1987-   1987-   1990-   1995-   2000-   2007-   2015-
                        2016    1990    1995    2000    2007    2016    2016

Private nonfarm business1

All Assets               3.3     3.9     3.5     6.0     3.3     1.7     2.5

  Equipment              4.5     3.9     4.3     9.1     4.6     2.2     3.4

    Information
    Processing
    Equipment (IPE)      8.8     8.8     8.5    18.6     8.6     4.0     3.3

      Computers &
      related equipment 16.1    18.7    17.2    40.6    13.5     4.8    -0.1

      Communication
      equipment          7.0     6.2     5.3    10.7     8.5     5.0     6.0

      Other IPE          2.4     2.0     3.2     3.3     2.3     1.7     2.7

    All other equipment  2.5     1.7     2.2     4.8     2.8     1.4     3.4

  Structures             1.6     2.9     2.0     2.2     1.2     0.9     1.1

  Intellectual property
  products (IPP)         5.8     8.3     7.2     8.4     5.1     3.2     4.4

      Research
         &    
      Development        3.8     5.6     4.2     4.6     2.9     3.1     3.3

      Software          10.1    18.5    15.0    15.9     7.7     3.8     6.2

      Artistic
      Originals          3.3     3.9     3.6     4.1     3.6     2.2     2.0

  Rental residential     1.2     1.9     0.9     1.8     2.2    -0.1     0.4
  capital

  Inventories            2.6     3.4     2.3     4.4     2.3     1.9     3.2

  Land                   0.6     1.5     1.3     1.3     0.7    -0.5     0.8

Private business1

All Assets               3.3     3.8     3.4     5.8     3.2     1.6     2.5

  Equipment              4.4     3.6     4.1     9.0     4.6     2.2     3.4

    Information
    Processing
    Equipment (IPE)      8.8     8.8     8.5    18.6     8.6     4.0     3.4

      Computers &
      related equipment 16.1    18.7    17.2    40.6    13.5     4.8    -0.1

      Communication
      equipment          7.0     6.2     5.3    10.7     8.5     5.0     6.0

      Other IPE          2.6     2.0     3.2     3.4     2.5     2.0     2.9

    All other equipment  2.4     1.4     2.0     4.7     2.8     1.5     3.4

  Structures             1.6     2.8     1.9     2.1     1.2     0.9     1.1

  Intellectual property
  products (IPP)         5.8     8.3     7.2     8.4     5.1     3.2     4.4

      Research
         &    
      Development        3.8     5.6     4.2     4.6     2.9     3.1     3.3

      Software          10.1    18.5    15.0    15.9     7.7     3.8     6.2

      Artistic
      Originals          3.3     3.9     3.6     4.1     3.6     2.2     2.0

  Rental residential     1.2     1.9     0.9     1.8     2.2    -0.1     0.4
  capital

  Inventories            2.5     3.0     2.3     4.2     2.2     1.8     3.1

  Land                   0.6     3.0     1.1     0.9     0.7    -0.7     0.4

1. Excludes government enterprises.

Note: Real capital services by asset type are not available for the most
recent reference year. For a brief discussion of methods used in 
preparing these data, see Technical Notes in this release.

Table D. Previous and revised multifactor productivity and related measures for
the 2015-2016 and 2014-2015 periods                                            

                                                                               
                                                           Inputs              
                                                                               
                          Multifactor   Real value-  Combined         Capital 
  Sector                  productivity1 added output inputs2   Labor3 services
                                                                               
              Annual percent change, 2015-2016                                 
Private nonfarm business                                                       
 Previous                  -0.2           1.7          1.9       1.6    2.4   
 Revised                   -0.6           1.5          2.1       1.8    2.5   
Private business                                                               
 Previous                  -0.1           1.8          1.9       1.6    2.3   
 Revised                   -0.5           1.6          2.0       1.8    2.5   
                                                                               
              Annual percent change, 2014-2015                                 
Private nonfarm business                                                       
 Previous                   0.6           3.2          2.5       2.6    2.5   
 Revised                    0.9           3.5          2.5       2.4    2.6   
Private business                                                               
 Previous                   0.5           3.2          2.6       2.7    2.4   
 Revised                    0.9           3.5          2.6       2.6    2.5   
                                                                               
1. Output per combined units of labor input and capital services.              
2. The growth rate of each input is weighted by its share of current           
   dollar costs.                                                               
3. Hours at work by age, education, and gender group, weighted by each group’s 
   share of total wages.                                                       

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Last Modified Date: March 21, 2018