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Economic News Release
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Multifactor productivity trends, 2020

For release 10:00 am    (ET) Tuesday, March 23, 2021	USDL-21-0547
Technical information:	(202) 691-5606  •  mfpweb@bls.gov  •  www.bls.gov/mfp
Media contact:	        (202) 691-5902  •  PressOffice@bls.gov


MULTIFACTOR PRODUCTIVITY TRENDS – 2020 

Private nonfarm business sector multifactor productivity decreased 1.7 percent 
in 2020, the U.S. Bureau of Labor Statistics reported today. (See table A.) 
This 2020 decrease reflects a 4.2-percent decrease in output and a 2.5-percent 
decrease in the combined inputs of capital and labor. Capital services grew by
2.4 percent and labor input–which is the combined effect of hours worked and 
labor composition–decreased by 5.2 percent. (See table 1.)

Multifactor productivity (MFP) 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
workers. Measures for the most recent year of this release are preliminary 
estimates.  See the Technical Notes for additional information.

Private business sector multifactor productivity also decreased 1.7 percent 
in 2020, as output decreased 4.1 percent and combined inputs decreased 2.4 
percent. (See table A, table 2.) 

Multifactor Productivity Trends

The 1.7-percent decline in nonfarm private business sector MFP in 2020 was the
result of combined inputs decreasing  (-2.5 percent) less than the decrease
in real value added output (-4.2 percent). The 1.7-percent decline in MFP is 
the largest decline in the measure since the Great Recession period of 2007-09,
which is also the last time both private nonfarm business output and private 
nonfarm business combined inputs decreased. 

The components of combined inputs can be broken down into capital services, 
hours worked, and labor composition. The 2020 capital services growth of 2.4 
percent was similar to the Great Recession’s capital services growth of 2.0 
percent. Hours worked experienced its largest decline since 2009 at 6.5 
percent. Labor composition in 2020 had a record growth of 1.6 percent which 
outpaced the 2007-09 recessionary growth by almost a full percentage point.

Labor Productivity Trends

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 the composition of labor. In 2020, 
private nonfarm business labor productivity increased 2.5 percent, the 
highest since a 3.4-percent increase in 2010. 

For private nonfarm business in 2020, the contribution of capital intensity 
to labor productivity was 3.3 percentage points, the largest contribution 
in the history of the series which began in 1948. Capital intensity is 
the ratio of capital services to hours worked in the production process. 
The higher the capital to hours ratio, the more capital intensive the
production process is. The 2020 increase in the contribution of capital 
intensity was due to a 6.5-percent decline in hours worked. 

The contribution of labor composition of 1.0 percentage points in 2020 is 
the largest annual contribution to labor productivity since the series began 
in 1948. The labor composition index estimates the effect of shifts in the age,
education, and gender composition of the workforce on hours worked. The 2020 
growth in the contribution of labor composition was again due to the large 
hours decline of 6.5 percent and a shift in the composition of the workforce 
to older and more educated employees.


Capital Services Trends

Capital services in the private nonfarm business sector increased at an average
annual rate of 3.0 percent in 2019, the latest year of available detailed 
capital data. This was the largest single year of growth since 2015 when 
capital services grew 3.1 percent. The high capital services growth in 2019
was driven by intellectual property products and equipment. Intellectual 
property products grew 5.8 percent in 2019, larger than the average annual 
growth rate of 4.5 percent in the 2007-19 business cycle. Equipment grew 3.6 
percent in 2019, slightly higher than the 2007-19 business cycle average annual
growth rate of 3.2 percent. (See table C.)


The 2007-19 business cycle continued the slowdown in capital services growth. 
Its average annual growth rate of 2.4 percent is almost half of the peak
average annual growth rate of 4.7 percent in the 1990-2000 business cycle, 
and 1.1-percentage points lower than the previous 2000-07 business cycle. 
(See table C.)



Table A.   Productivity, output, and inputs in the private nonfarm business
and private business sectors for selected periods,1987-2020

Compound annual growth rates


                              1987- 1987- 1990- 2000- 2007- 2018- 2019-
                              2020  1990  2000  2007  2019  2019  2020

Private nonfarm business1

Productivity
  Multifactor Productivity2    0.7   0.4   1.0   1.4   0.5   0.7  -1.7
  Labor productivity3          2.0   1.4   2.2   2.7   1.4   1.8   2.5
  Output per unit of
    capital                   -0.7  -0.5  -0.6  -0.6  -0.4  -0.5  -6.4


Output                         2.7   3.2   4.0   2.9   2.0   2.5  -4.2
Combined inputs4               1.9   2.8   3.0   1.5   1.5   1.8  -2.5
   Labor input5                1.2   2.3   2.2   0.5   0.9   1.0  -5.2
     Hours                     0.7   1.8   1.7   0.1   0.5   0.7  -6.5
     Labor Composition6        0.5   0.5   0.5   0.4   0.4   0.3   1.6
   Capital services            3.4   3.8   4.7   3.5   2.4   3.0   2.4
Analytic ratio
   Capital intensity7          2.7   2.0   2.9   3.4   1.8   2.3   9.5


Private business1

Productivity
  Multifactor Productivity2    0.8   0.5   1.0   1.4   0.5   0.7  -1.7
  Labor productivity3          2.0   1.6   2.3   2.8   1.4   1.8   2.5
  Output per unit of
    capital                   -0.6  -0.5  -0.5  -0.6  -0.3  -0.5  -6.4


Output                         2.7   3.2   4.0   2.9   2.0   2.5  -4.1
Combined inputs4               1.9   2.7   2.9   1.4   1.5   1.8  -2.4
   Labor input5                1.1   2.2   2.2   0.4   0.9   1.0  -5.1
     Hours                     0.7   1.6   1.7   0.1   0.5   0.7  -6.4
     Labor Composition6        0.5   0.5   0.5   0.4   0.4   0.3   1.5
   Capital services            3.3   3.7   4.5   3.4   2.3   3.0   2.4
Analytic ratio
   Capital intensity7          2.7   2.0   2.8   3.4   1.8   2.2   9.5


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,1987-2020

Compound annual growth rates



                    1987- 1987- 1987- 1990- 2000- 2007- 2018- 2019-
                    2019  2020* 1990  2000  2007  2019  2019  2020*

Private nonfarm 
   business1

Labor productivity2  2.0   2.0   1.4   2.2   2.7   1.4   1.8   2.5

Contribution of
capital intensity3   0.9   0.9   0.6   0.9   1.1   0.7   0.9   3.3

   Contribution of
   information 
   processing 
   equipment(IPE)4   0.3    NA   0.3   0.4   0.4   0.2   0.2    NA   

   Contribution of 
   research and
   development
   (R&D)5            0.1    NA   0.1   0.1   0.1   0.1   0.2    NA

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

   Contribution of 
   capital 
   services 
   excluding IPP
   and IPE           0.2    NA   0.1   0.2   0.4   0.2   0.3    NA

Contribution of 
labor composition7   0.3   0.3   0.4   0.3   0.2   0.2   0.2   1.0

Multifactor 
productivity8        0.8   0.7   0.4   1.0   1.4   0.5   0.7  -1.7

  Contribution of 
  R&D to 
  multifactor 
  productivity       0.2   NA    0.2   0.2   0.2   0.1   0.2   NA


Private business1

Labor productivity2  2.0   2.0   1.6   2.3   2.8   1.4   1.8   2.5

Contribution of
capital intensity3   0.8   0.9   0.7   0.9   1.1   0.7   0.8   3.3

   Contribution of
   information 
   processing 
   equipment(IPE)4   0.3    NA   0.3   0.4   0.4   0.2   0.2    NA   

   Contribution of 
   research and
   development
   (R&D)5            0.1    NA   0.1   0.1   0.1   0.1   0.2    NA

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

   Contribution of 
   capital 
   services 
   excluding IPP
   and IPE           0.2    NA   0.1   0.2   0.4   0.2   0.3    NA

Contribution of 
labor composition7   0.3   0.3   0.4   0.3   0.3   0.2   0.2   1.0

Multifactor 
productivity8        0.9   0.8   0.5   1.0   1.4   0.5   0.7  -1.7

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, 1987-2019

Average annual growth rates

    		                1987-   1987-   1990-   2000-   2007-   2018-
		                2019    1990    2000    2007    2019    2019

Private nonfarm business1	
						
All assets		         3.5	 3.8	 4.7	 3.5	 2.4	 3.0

  Equipment		         4.6	 3.8	 6.5	 4.9	 3.2	 3.6
   
    Information 
    Processing 
    Equipment (IPE)	         9.4	 8.5	13.0	 9.5	 6.8	 6.6
	  
      Computers & 
      related equipment	        15.6	18.4	28.1	14.4	 6.1	 5.8
		 
      Communication 
      equipment			 9.1	 6.2	 7.9	 9.7	10.4	 9.6
		 
      Other IPE			 3.0	 2.1	 3.3	 3.2	 2.9	 4.1
	  
    All other equipment	 	 2.5	 1.7	 3.5	 2.9	 1.7	 2.5
	
  Structures		         1.6	 2.9	 2.1	 1.3	 1.0	 1.2
  
  Intellectual property 
  products (IPP)	  	 5.9	 7.8	 7.4	 5.5	 4.5	 5.8
  
      Research 
	     &
      Development	 	 4.5	 5.8	 5.4	 4.2	 3.5	 4.4
	  
      Software			10.3	17.0	13.9	 8.2	 6.8	 8.9
	  
      Artistic 
      Originals			 3.1	 3.8	 3.7	 3.6	 2.0	 2.1
	  
  Rental residential 
  capital			 1.1	 2.0	 1.4	 2.2	 0.1	 0.5
  
  Inventories		  	 2.7	 3.2	 3.5	 2.2	 2.2	 3.4
  
  Land				 0.8 	 1.3	 1.3	 0.7	 0.4	 1.3
							
Private business1				
			
All assets			 3.4	 3.7	 4.5	 3.4	 2.3	 3.0
  
  Equipment			 4.5	 3.5	 6.3	 4.9	 3.2	 3.5
    
	Information
    Processing 
    Equipment (IPE)		 9.5	 8.5	13.0	 9.6	 6.8	 6.6
	
      Computers & 
      related equipment	        15.6	18.4	28.1	14.4	 6.1	 5.8
	  
      Communication
      equipment			 9.1	 6.2	 7.9	 9.7	10.4	 9.6
	  
      Other IPE			 3.1	 2.1	 3.4	 3.3	 3.1	 4.0
      
	All other equipment      2.4	 1.4	 3.3	 2.8     1.8	 2.5
   
   Structures			 1.5	 2.8	 2.0	 1.2	 1.0	 1.2
   
  Intellectual Property 
  Products (IPP)		 5.9	 7.8	 7.4	 5.5	 4.5	 5.8
   
      Research
	     &
      Development		 4.5	 5.8	 5.4	 4.2	 3.5	 4.4
      
	  Software		10.3	17.0	13.9	 8.2	 6.8	 8.9
      
	  Artistic 
      Originals			 3.1	 3.8	 3.7	 3.6	 2.0	 2.1
   
  Rental residential 
  capital	 		 1.1	 2.0	 1.4	 2.2	 0.1	 0.5
  
  Inventories		 	 2.6	 2.7	 3.4	 2.1	 2.1	 3.1
  
  Land				 0.8	 3.0	 1.0	 0.7	 0.1	 1.2
  
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 the Technical Notes in this release.

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Last Modified Date: March 23, 2021