Multifactor productivity trends, 2018

For release 10:00 am (EDT) March 20, 2019	USDL-19-0450
Technical information:	(202) 691-5606  •  mfpweb@bls.gov  •  www.bls.gov/mfp
Media contact:	        (202) 691-5902  •  PressOffice@bls.gov

	MULTIFACTOR PRODUCTIVITY TRENDS – 2018 

Private nonfarm business sector multifactor productivity increased 1.0 percent
in 2018, the U.S. Bureau of Labor Statistics reported today. 
(See chart 1, table A.) This 2018 increase reflects a 3.5-percent 
increase in output and a 2.6-percent increase in the combined inputs
of capital and labor. Capital services grew by 2.9 percent and labor
input–which is the combined effect of hours worked and labor 
composition–grew by 2.4 percent. Multifactor productivity increased
0.4 percent in 2017. (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 also increased at a 
1.0-percent annual rate in 2018. A 3.5-percent increase in output 
outpaced a 2.5-percent increase in the combined inputs of capital and
labor in 2018. (See table A, table 2.) 

2018 Multifactor Productivity Trends

The 1.0-percent growth of multifactor productivity in the nonfarm business
sector is 0.2 percentage point higher than the average annual rate of 0.8 
percent from the 1987-2018 period. For the 2007-18 period, reflecting the
most recent business cycle, multifactor productivity grew at an average 
annual rate of 0.4 percent as output grew 1.9 percent and combined inputs rose
1.5 percent. The average annual increase in combined inputs reflected a 
2.3-percent increase in capital services along with a 0.9-percent increase
in labor input. (See table A.)

The 1.0-percent multifactor productivity increase was the largest increase 
since the 2010 increase of 2.6 percent. Over the last 8 years, labor 
productivity growth has been at or below the 1.3 annual percent growth rate of
2018. 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. The contribution of 
capital intensity grew 0.7 percentage points in the 2007-18 period and 
remains the largest contributor to labor productivity growth in the period. 
(See chart 2.) The contributions of labor composition decelerated slightly 
between the 2000-07 period and the 2007-18 period, to 0.2 percent. 
(See chart 2, table B.) 

Revisions to 2017 Multifactor Productivity Growth

In 2017, the multifactor productivity growth rate in the private nonfarm 
business sector was revised down from an average annual rate of 0.9 percent 
to an average annual rate of 0.4 percent due to a downward revision to output
of 0.2 percentage point and an upward revision to combined inputs of 0.3 
percentage point. In 2016, the multifactor productivity growth rate in 
the private nonfarm business sector remained as previously published, 
declining at an average annual rate of 0.6 percent. (See table D.)

Historical Revisions to Capital Services and Labor Input 1987-2017

The capital services and labor input estimates in this release reflect 
important data source revisions to capital and an improvement in
methodology to estimating labor composition. 

The capital measures in this release reflect the July 27, BEA 2018 
Comprehensive Update of the National Income and Product Accounts (NIPA)
as well as the November 1, 2018 Gross Domestic Product by Industry: 
Second Quarter 2018. Historical revisions in these accounts had a notable 
impact on the measures of capital services due to the following:
•	Incorporation of an estimate of the value of capital services 
in measures of own-account investment in software and in R&D beginning
with 2007, bringing these measures into greater alignment with economic theory.
•	A reclassification of R&D for software from private fixed investment
in software to private fixed investment in R&D beginning with 1987,
resolving an inconsistency between the NIPA measures of R&D and the 
source data underlying the NIPA measures.

The labor composition component of labor input incorporated a revised 
smoothing methodology to better account for missing data. Additionally,
an educational attainment distinction of college/no college has been added.
The impact to the long-term growth estimates from the labor composition 
update were negligible; however, year to year estimates can show moderate 
revisions. These revisions span the entire period and are mostly derived 
from the improved smoothing method rather than a change to any trends. 

The impact of these data source and methodology revisions in the recent 
period can be seen on Table D.  

The impact of the revisions to capital services span the 1987-2017 time 
series. Average annual growth of capital services in the long term has 
been revised up 0.2 percent. In the most recent business cycle, 2007-17,
the revisions were more pronounced with a 0.6-percentage point increase 
in the average annual growth. (See Chart 3.)

The revision to capital services in the most recent business cycle can be
attributed to the changes in the source data treatment of software and 
research and development (R&D). Software and R&D assets, along with artistic
originals, make up the intellectual property products category of capital 
which experienced a 1.1-percentage point upward revision over the 2007-16
period. A comparison of the latest business cycle and the long term growth 
in the intellectual property products category depicting the most notable 
revisions are found in Chart 4.

Table A.   Productivity, output, and inputs in the private nonfarm business
and private business sectors for selected periods,1987-2018

Average annual growth rates


                              1987- 1987- 1990- 1995- 2000- 2007- 2016- 2017-
                              2018  1990  1995  2000  2007  2018  2017  2018

Private nonfarm business1

Productivity
  Multifactor Productivity2    0.8   0.4   0.6   1.4   1.4   0.4   0.4   1.0
  Labor productivity3          2.0   1.5   1.7   2.9   2.8   1.3   1.1   1.3
  Output per unit of
    capital                   -0.6  -0.6  -0.5  -0.8  -0.6  -0.5  -0.2   0.6


Output                         2.9   3.2   2.9   5.1   2.9   1.9   2.7   3.5
Combined inputs4               2.1   2.8   2.4   3.7   1.4   1.5   2.3   2.6
   Labor input5                1.4   2.3   1.8   2.5   0.4   0.9   1.9   2.4
     Hours                     0.9   1.7   1.2   2.2   0.1   0.5   1.6   2.2
     Labor Composition6        0.4   0.5   0.6   0.4   0.4   0.4   0.3   0.2
   Capital services            3.5   3.8   3.5   6.0   3.5   2.3   2.9   2.9
Analytic ratio
   Capital intensity7          2.6   2.1   2.3   3.7   3.4   1.8   1.3   0.7


Private business1

Productivity
  Multifactor Productivity2    0.9   0.5   0.5   1.6   1.4   0.4   0.4   1.0
  Labor productivity3          2.0   1.6   1.6   3.0   2.8   1.3   1.1   1.4
  Output per unit of
    capital                   -0.5  -0.5  -0.4  -0.6  -0.5  -0.4  -0.2   0.7


Output                         2.9   3.2   2.9   5.1   2.9   1.9   2.6   3.5
Combined inputs4               2.0   2.7   2.4   3.5   1.4   1.4   2.2   2.5
   Labor input5                1.3   2.1   1.9   2.4   0.4   0.9   1.8   2.3
     Hours                     0.9   1.6   1.3   2.0   0.0   0.6   1.5   2.1
     Labor Composition6        0.4   0.5   0.6   0.4   0.4   0.4   0.3   0.2
   Capital services            3.4   3.8   3.3   5.8   3.4   2.3   2.9   2.8
Analytic ratio
   Capital intensity7          2.5   2.1   2.1   3.7   3.4   1.7   1.3   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,1987-2018

Average annual growth rates/ percentage point



                    1987- 1987- 1987- 1990- 1995- 2000- 2007- 2007- 2016- 2017-
                    2017  2018* 1990  1995  2000  2007  2017  2018* 2017  2018*

Private nonfarm 
   business1

Labor productivity
Growth2              2.0   2.0   1.5   1.7   2.9   2.8   1.3   1.3   1.1   1.3

Contribution of
capital intensity3   0.9   0.9   0.7   0.7   1.2   1.1   0.7   0.7   0.5   0.2

   Contribution of
   information 
   processing 
   equipment(IPE)4   0.3    NA   0.3   0.3   0.6   0.4   0.2    NA   0.2    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   0.2   0.2   0.2    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   0.0    NA

Contribution of 
labor composition7   0.3   0.3   0.4   0.4   0.2   0.3   0.3   0.2   0.2   0.1

Multifactor 
productivity Growth8 0.8   0.8   0.4   0.6   1.4   1.4   0.3   0.4   0.4   1.0

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


Private business1

Labor productivity
Growth2              2.0   2.0   1.6   1.6   3.0   2.8   1.3   1.3   1.1   1.4

Contribution of
capital intensity3   0.9   0.9   0.7   0.7   1.2   1.1   0.7   0.6   0.5   0.3

   Contribution of
   information 
   processing 
   equipment(IPE)4   0.3    NA   0.3   0.3   0.6   0.4   0.2    NA   0.2    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   0.2   0.2   0.2    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   0.0    NA

Contribution of 
labor composition7   0.3   0.3   0.4   0.4   0.2   0.3   0.2   0.2   0.2   0.1

Multifactor 
productivity Growth8 0.9   0.9   0.5   0.5   1.6   1.4   0.4   0.4   0.4   1.0

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

Average annual growth rates

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

Private nonfarm business1

All Assets               3.5     3.8     3.5     6.0     3.5     2.3     2.9

  Equipment              4.9     3.9     4.3     9.3     5.0     3.2     3.9

    Information
    Processing
    Equipment (IPE)      9.9     8.7     8.6    18.8     9.6     7.0     7.0

      Computers &
      related equipment 16.7    18.5    17.4    40.7    14.6     6.9     3.9

      Communication
      equipment          9.0     6.2     5.3    10.7     9.6    10.7    12.6

      Other IPE          2.9     2.0     3.2     3.4     3.1     2.7     3.5

    All other equipment  2.5     1.7     2.2     4.8     2.9     1.6     2.6

  Structures             1.6     2.9     2.0     2.2     1.3     1.0     1.2

  Intellectual property
  products (IPP)         6.0     8.0     6.8     8.2     5.5     4.4     5.7

      Research
         &    
      Development        4.4     5.8     5.1     5.6     4.2     3.2     4.2

      Software          10.6    17.5    12.7    15.6     8.3     6.8     8.5

      Artistic
      Originals          3.2     3.8     3.5     4.0     3.6     2.2     2.3

  Rental residential     1.2     2.0     0.9     1.9     2.2     0.0     0.7
  capital

  Inventories            2.6     3.4     2.3     4.3     2.2     2.0     0.6

  Land                   0.8     1.4     1.3     1.2     0.7     0.1     1.2

Private business1

All Assets               3.4     3.8     3.3     5.8     3.4     2.2     2.9

  Equipment              4.8     3.6     4.1     9.1     4.9     3.2     3.8

    Information
    Processing
    Equipment (IPE)     10.0     8.7     8.6    18.8     9.6     7.1     6.9

      Computers &
      related equipment 16.7    18.5    17.4    40.7    14.6     6.9     3.9

      Communication
      equipment          9.0     6.2     5.3    10.7     9.6    10.7    12.6

      Other IPE          3.0     2.1     3.2     3.4     3.3     2.9     3.5

    All other equipment  2.4     1.4     2.0     4.7     2.8     1.6     2.6

  Structures             1.6     2.8     1.9     2.2     1.3     1.0     1.2

  Intellectual property
  products (IPP)         6.0     8.1     6.8     8.2     5.5     4.4     5.7

      Research
         &    
      Development        4.4     5.8     5.1     5.6     4.2     3.2     4.2

      Software          10.6    17.5    12.7    15.6     8.3     6.8     8.5

      Artistic
      Originals          3.2     3.8     3.5     4.0     3.6     2.2     2.3

  Rental residential     1.2     2.0     0.9     1.9     2.2     0.0     0.7
  capital

  Inventories            2.5     2.9     2.3     4.2     2.1     1.9     0.5

  Land                   0.7     2.9     1.1     0.8     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 Technical Notes in this release.

Table D. Previous and revised multifactor productivity and related measures for
the 2016-2017 and 2015-2016 periods                                            

                                                                               
                                                           Inputs              
                                                                               
                          Multifactor   Real value-  Combined         Capital 
  Sector                  productivity1 added output inputs2   Labor3 services
                                                                               
              Annual percent change, 2016-2017                                 
Private nonfarm business                                                       
 Revised                    0.4           2.7          2.3       1.9    2.9   
Private business                                                               
 Revised                    0.4           2.6          2.2       1.8    2.9   
                                                                               
              Annual percent change, 2015-2016                                 
Private nonfarm business                                                       
 Previous                   0.9           2.9          2.0       1.9    2.2   
 Revised                   -0.6           1.6          2.2       1.8    3.0   
Private business                                                               
 Previous                   0.8           2.7          2.0       1.8    2.2   
 Revised                   -0.5           1.6          2.2       1.8    2.9   
                                                                               
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 20, 2019