Multifactor productivity trends, 2016

For release 10:00 am (EDT) March 30, 2017	USDL-17-0375
Technical information:	(202) 691-5606   •  mfpweb@bls.gov  •  www.bls.gov/mfp
Media contact:	        (202) 691-5902   •  PressOffice@bls.gov 

(Note: The Bureau of Labor Statistics identified an error in the estimates 
of the contribution of intellectual property products (IPP) excluding 
research and development (R&D) to labor productivity and the contribution
of capital services excluding information processing equipment (IPE) & IPP
to labor productivity. This error affects Table B of Multifactor
Productivity Trends – 2016. No other measures besides the measures 
listed above were affected by this error. The data in this release will
not be corrected. For more information, please visit
https://www.bls.gov/bls/errata/productivity-correction-11082017.htm.)

MULTIFACTOR PRODUCTIVITY TRENDS – 2016 

Private nonfarm business sector multifactor productivity decreased at a 
0.2-percent annual rate in 2016, the U.S. Bureau of Labor Statistics 
reported today. (See chart 1, table A.) This 2016 decline reflected a 
1.7-percent increase in output and a 1.9-percent increase 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–grew by 1.6 percent. This was the first decline in multifactor
productivity growth since 2009. (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 decreased at a 0.1-percent
annual rate in 2016. A 1.8-percent increase in output and a 1.9-percent 
increase in the combined inputs of capital and labor resulted in the 
multifactor productivity decline in 2016. (See table 2, table A.)

Trends in the private nonfarm business sector

Multifactor productivity in the private nonfarm business sector grew at
an average annual percent rate of 0.9 percent from 1987 to 2016. For the
2007-2016 period, multifactor productivity grew 0.4 percent on average as
combined inputs increased at an average annual rate of 1.0 percent and output
increased at a 1.4 percent average annual rate. The increase in combined 
inputs reflected a 1.7-average annual percent increase in capital services 
along with an increase in labor input at an average annual rate of 0.7 
percent. (See table A.)

In the 2007-2016 period, annual labor productivity decelerated to 1.2 percent
at an annual average rate, as compared to the 2.7 rate in the 2000-2007 
period. Annual 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. 

Labor productivity growth in the 2007-2016 period slowed due to decelerations
in multifactor productivity growth and the contribution of capital intensity
which both reflect the lowest contributions to labor productivity growth 
observed in the 1987-2016 period as viewed over the sub periods of growth.
(See chart 2) The contribution of capital intensity amounted to 0.5 percentage
point of the labor productivity growth, while the contribution of labor 
composition amounted to 0.3 percentage point of the labor productivity growth.
Additionally, the average annual growth in multifactor productivity over the
2007-2016 period of 0.4 percent contributed roughly a third to the overall 
growth in labor productivity of 1.2 percent. Multifactor productivity growth 
decelerated by 1.0 percentage points from the 2000-2007 business cycle and 
the contribution of capital intensity decelerated by a half of a percentage
point. The contributions to labor composition slightly increased to 0.3 
percent in the 2007-2016 period from the 2000-2007 period. 
(See chart 2, table B.) 

The deceleration of capital services since 2000 is largely due to a
major deceleration in the growth of equipment and intellectual property 
products. Equipment continued to decelerate from the peak in the 
1995-2000 period, when it grew at an 8.9 percent average annual rate
to 2.0 percent in the more recent 2007-2015 period. Intellectual 
property products decelerated from a peak of 8.4 average annual percent
change in the 1995-2000 period to 3.0 percent in 2007-2015. 
(See chart 3, table C.)

Within equipment, computers decelerated from a 13.7 average annual 
percent rate of growth in the 2000-2007 period to 5.4 average annual
percent in 2007-2015. (See chart 4, table C.) Within intellectual 
property products, software decelerated from a 7.5 average annual percent
rate of growth in the 2000-2007 period to 3.3 percent in 2007-2015. 
(See chart 5, table C.) 

Revisions
In 2015, multifactor productivity growth rates in the private nonfarm 
business sector were revised up from 0.2 percent to 0.6 percent in 2015,
due to a revision in output. In 2014, multifactor productivity measures 
in the private nonfarm business sector were unchanged. (See table D.)

Table A.   Productivity, output, and inputs in the private nonfarm business
and private business sectors for selected periods,1987-2016

Compound annual growth rates


                              1987- 1987- 1990- 1995- 2000- 2007- 2014- 2015-
                              2016  1990  1995  2000  2007  2016  2015  2016

Private nonfarm business1

Productivity
  Multifactor Productivity2    0.9   0.6   0.5   1.4   1.4   0.4   0.6  -0.2
  Labor productivity3          1.9   1.5   1.6   2.8   2.7   1.2   0.9   0.2
  Output per unit of
    capital services          -0.4  -0.5  -0.4  -0.8  -0.4  -0.2   0.6  -0.6


Output                         2.8   3.2   3.0   5.0   2.8   1.4   3.2   1.7
Combined inputs4               1.9   2.6   2.4   3.6   1.4   1.0   2.5   1.9
   Labor input5                1.3   2.1   2.0   2.5   0.5   0.7   2.6   1.6
     Hours                     0.9   1.7   1.3   2.2   0.1   0.3   2.2   1.5
     Labor Composition6        0.4   0.3   0.7   0.3   0.4   0.4   0.4   0.1
   Capital services            3.3   3.7   3.3   5.9   3.2   1.7   2.5   2.4
Analytic ratio
   Capital intensity7          2.4   2.0   2.0   3.6   3.1   1.4   0.3   0.8


Private business1

Productivity
  Multifactor Productivity2    0.9   0.7   0.5   1.6   1.5   0.4   0.5  -0.1
  Labor productivity3          2.0   1.6   1.5   3.0   2.7   1.2   0.8   0.3
  Output per unit of
    capital services          -0.3  -0.4  -0.2  -0.6  -0.4  -0.2   0.7  -0.5


Output                         2.8   3.2   2.9   5.1   2.8   1.5   3.2   1.8
Combined inputs4               1.9   2.5   2.4   3.4   1.3   1.0   2.6   1.9
   Labor input5                1.3   1.9   2.0   2.3   0.4   0.7   2.7   1.6
     Hours                     0.8   1.6   1.4   2.0   0.1   0.3   2.3   1.5
     Labor Composition6        0.4   0.3   0.7   0.3   0.4   0.4   0.4   0.1
   Capital services            3.2   3.7   3.2   5.7   3.2   1.6   2.4   2.3
Analytic ratio
   Capital intensity7          2.3   2.1   1.8   3.6   3.1   1.3   0.0   0.8


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 the total wage bill.
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,1987-2016

Compound annual growth rates



                    1987- 1987- 1987- 1990- 1995- 2000- 2007- 2007- 2014- 2015-
                    2015  2016* 1990  1995  2000  2007  2015  2016* 2015  2016*

Private nonfarm 
   business1

Labor productivity2  2.0   1.9   1.5   1.6   2.8   2.7   1.3   1.2   0.9   0.2

Contribution of
capital intensity3   0.8   0.8   0.6   0.6   1.2   1.0   0.5   0.5   0.1   0.3

   Contribution of
   information 
   processing 
   equipment(IPE)4   0.3    NA   0.3   0.3   0.6   0.3   0.1    NA   0.0    NA

   Contribution of 
   research and
   development
   (R&D)5            0.1    NA   0.1   0.1   0.1   0.1   0.1    NA   0.0    NA

   Contribution of 
   intellectual 
   property 
   products (IPP)
   excluding R&D6    0.2    NA   0.2   0.4   0.4  -0.1   0.1    NA   0.1    NA

   Contribution of 
   capital 
   services 
   excluding IPP
   and IPE           0.2    NA   0.0  -0.1   0.1   0.7   0.2    NA   0.0    NA

Contribution of 
labor composition7   0.3   0.3   0.2   0.5   0.2   0.2   0.3   0.3   0.2   0.1

Multifactor 
productivity8        0.9   0.9   0.6   0.5   1.4   1.4   0.5   0.4   0.6  -0.2

  Contribution of 
  R&D to 
  multifactor 
  productivity 


Private business1

Labor productivity2  2.0   2.0   1.6   1.5   3.0   2.7   1.3   1.2   0.8   0.3

Contribution of
capital intensity3   0.8   0.8   0.7   0.6   1.2   1.0   0.5   0.5   0.0   0.3

   Contribution of
   information 
   processing 
   equipment(IPE)4   0.3    NA   0.3   0.3   0.6   0.3   0.1    NA   0.0    NA

   Contribution of 
   research and
   development
   (R&D)5            0.1    NA   0.1   0.1   0.1   0.1   0.1    NA   0.0    NA

   Contribution of 
   intellectual 
   property 
   products (IPP)
   excluding R&D6    0.2    NA   0.2   0.4   0.4  -0.1   0.1    NA   0.1    NA

   Contribution of 
   capital 
   services 
   excluding IPP
   and IPE           0.2    NA   0.1  -0.1   0.1   0.7   0.2    NA  -0.1    NA

Contribution of 
labor composition7   0.3   0.3   0.2   0.5   0.2   0.2   0.3   0.3   0.2   0.1

Multifactor 
productivity8        1.0   0.9   0.7   0.5   1.6   1.5   0.5   0.4   0.5  -0.1

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, 1987-2015

Compound annual growth rates

                        1987-   1987-   1990-   1995-   2000-   2007-   2014-
                        2015    1990    1995    2000    2007    2015    2015

Private nonfarm business1

All Assets               3.3     3.7     3.3     5.9     3.2     1.6     2.5

  Equipment              4.4     3.6     4.1     8.9     4.5     2.0     3.3

    Information
    Processing
    Equipment (IPE)      8.9     8.8     8.1    18.4     8.6     3.9     2.6

      Computers &
      related equipment 16.5    18.7    15.8    40.7    13.7     5.4     1.4

      Communication
      equipment          6.9     5.7     5.2    10.9     8.5     4.6     3.6

      Other IPE          2.7     2.6     3.7     3.4     2.6     1.6     2.5

    All other equipment  2.4     1.3     2.1     4.6     2.7     1.2     3.5

  Structures             1.6     2.8     1.9     2.1     1.2     0.9     1.3

  Intellectual property
  products (IPP)         5.6     8.0     6.6     8.4     4.9     3.0     3.8

      Research
         &    
      Development        3.8     5.6     4.2     4.6     2.9     3.1     3.2

      Software          10.0    17.8    13.5    17.0     7.5     3.3     5.1

      Artistic
      Originals          3.3     3.9     3.6     4.1     3.6     2.2     2.1

  Residential rental     1.2     1.9     0.9     1.8     2.2    -0.2     0.2
  capital

  Inventories            2.6     3.4     2.3     4.4     2.3     1.6     4.4

  Land                   0.8     1.7     1.2     1.3     0.6    -0.1     1.3

Private business1

All Assets               3.2     3.7     3.2     5.7     3.2     1.6     2.4

  Equipment              4.3     3.3     3.8     8.8     4.5     2.1     3.3

    Information
    Processing
    Equipment (IPE)      8.9     8.8     8.1    18.4     8.6     4.0     2.7

      Computers &
      related equipment 16.5    18.7    15.8    40.7    13.7     5.4     1.4

      Communication
      equipment          6.9     5.7     5.3    10.9     8.5     4.6     3.6

      Other IPE          2.8     2.6     3.8     3.5     2.7     2.0     2.8

    All other equipment  2.3     1.0     1.9     4.5     2.7     1.3     3.5

  Structures             1.6     2.7     1.9     2.1     1.2     0.9     1.3

  Intellectual property
  products (IPP)         5.6     8.0     6.6     8.4     4.9     3.0     3.8

      Research
         &    
      Development        3.8     5.6     4.2     4.6     2.9     3.1     3.2

      Software          10.0    17.8    13.5    17.0     7.5     3.3     5.1

      Artistic
      Originals          3.3     3.9     3.6     4.1     3.6     2.2     2.1

  Residential rental     1.2     1.9     0.9     1.8     2.2    -0.2     0.2
  capital

  Inventories            2.4     3.0     2.3     4.2     2.2     1.4     4.3

  Land                   0.7     3.3     1.0     0.9     0.6    -0.4     0.2

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 2014-2015 and 2013-2014 periods                                            

                                                                               
                                                           Inputs              
                                                                               
                          Multifactor   Real value-  Combined         Capital 
  Sector                  productivity1 added output inputs2   Labor3 services
                                                                               
              Annual percent change, 2014-2015                                 
Private nonfarm business                                                       
 Previous                   0.2           2.8          2.6       2.6    2.6   
 Revised                    0.6           3.2          2.5       2.6    2.5   
Private business                                                               
 Previous                   0.2           2.9          2.7       2.8    2.6   
 Revised                    0.5           3.2          2.6       2.7    2.4   
                                                                               
              Annual percent change, 2013-2014                                 
Private nonfarm business                                                       
 Previous                   0.7           3.1          2.4       2.5    2.1   
 Revised                    0.7           3.1          2.4       2.5    2.2   
Private business                                                               
 Previous                   0.7           3.1          2.4       2.6    2.0   
 Revised                    0.6           3.0          2.4       2.6    2.1   
                                                                               
1. Output per combined units of hours, capital services, energy, materials,    
   and purchased business 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: November 08, 2017