Total Factor Productivity for Major Industries – 2022

For release 10:00 a.m. (ET) Tuesday, November 21, 2023	USDL-23-2474
Technical information: (202) 691-5606 •  productivity@bls.gov • 
www.bls.gov/productivity 
Media contact:	(202) 691-5902 •  PressOffice@bls.gov

TOTAL FACTOR PRODUCTIVITY FOR MAJOR INDUSTRIES – 2022

Total factor productivity (TFP) increased in 9 out of 21 major industries in
2022, the U.S. Bureau of Labor Statistics (BLS) reported today, led by 
service providing industries. Many of the TFP increases in 2022 were driven
by strong output growth outpacing increases in the combined inputs of 
capital, labor, energy, materials, and services.  

Output increased in 17 of 21 major industries in 2022. Over the longer
2019-22 time period, 13 of the 21 industries had positive or no output growth.
This illustrates that output in the remaining 8 industries is still below
pre-COVID-19 pandemic levels. (See tables 1 and 3.)

Combined inputs increased in 19 of the 21 industries in 2022. 
All goods producing industries experienced combined input growth greater 
than output growth, leading to declining TFP for these industries. 
(See table 1.) Over the 2019-22 time period, labor input has grown in 14 
of 21 industries, demonstrating that these industries have recovered labor
losses from 2020.

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|	                2017 NAICS Reclassification	        	     |
|All industry series have been updated to reflect industry definitions       |
|consistent with the 2017 North American Industry Classification             |
|System (NAICS). All indexes are rebased to 2017=100 to reflect the new      | 
|definitions.                                                                |
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Total factor productivity is defined as output per unit of combined inputs.
TFP shows the relationship between changes in real sectoral output and changes
in the combined inputs of capital input (K), labor input (L), and intermediate
inputs (energy (E), materials (M), and services (S)) used in production of 
final goods and services. It reflects economic growth that is not due to 
growth in measured KLEMS inputs, including technological change, 
organizational changes in the production process, and other 
efficiency improvements.

Total factor productivity and KLEMS as sources of labor productivity growth

As the economy continued to rebuild after the COVID-19 pandemic, the growth
of output was outpaced by growth in hours worked, leading to declines in 
labor productivity for 12 of the 21 industries measured in 2022. (See table 5.)

Labor productivity can be expressed as the sum of six components: 
total factor productivity growth (TFP), contribution of capital intensity,
contribution of labor composition, contribution of energy intensity, 
contribution of materials intensity, and the contribution of services 
intensity. The contribution of each KLEMS input is defined as the ratio
of the services provided by that input to hours worked in the production
process, weighted by its share of sectoral output. Examining input 
contributions and TFP changes reveals the substitution effect of increased
use of an input relative to labor on an industry’s labor productivity. 
(See table 5.) 

Of the 9 industries with labor productivity growth in 2022, 
TFP was the largest contributor to labor productivity growth in 5
industries, with services intensity being the largest contributor
for the remaining 4 industries. Capital intensity fell in 12 of the 
21 industries measured, as hours growth outpaced capital input growth. 
Management of companies labor productivity grew 7.7 percent in 2022, the 
largest growth of the industries measured, due to the large TFP contribution
of 6.0 percentage points.

TFP and input contributions to output

The nation's private business sector output growth can be viewed as the sum 
of three components: total factor productivity, contribution of capital input,
and contribution of labor input. The drivers of output growth for the private
business sector in 2022 were labor input, which contributed 2.4 percentage
points to output growth and capital input with a 1.1-percentage point 
contribution. Total factor productivity was a drag on output growth with a
negative contribution of 2.2 percentage points.

Productivity growth is often viewed as a long run measure, especially when 
an economic shock like the COVID-19 pandemic happens. While TFP growth and
contributions of capital and labor have been volatile over the last 3 years,
the current business cycle of 2019-22 shows similar contributions to the 
previous 2007-19 business cycle.
 
The private business sector can be divided into four broad sectors: 
goods producing; information and communication technology (ICT); finance, 
insurance, and real estate (FIRE); and service providing. Looking at these 
sectors provides further insights on how different sectors of the economy 
contribute to output. (See footnotes after table 7 for industry makeup 
of each sector.)

TFP’s contribution to output

The negative total factor productivity contribution to output for the
private business sector in 2022 was widespread, with 3 of 4 sectors
experiencing negative contributions. The goods producing sector accounted 
for the majority of the decline in private business TFP with a negative
contribution of 1.3 percentage points. Within the goods producing sector, 
the construction (-0.6 percentage point) and oil and gas extraction
(-0.4 point) industries were the primary contributors. These two industries 
led the goods producing sector’s contribution in the 2019-22 business cycle
(-0.3 percentage point), as manufacturing became a positive contributor to
the nation’s TFP growth due to positive contributions from nondurable
manufacturing compared to the 2007-19 period.  (See tables 6 through 10.)

Labor’s contribution to output

In 2022, labor input positively contributed to private business sector 
output within all four aggregated sectors. The service providing sector 
had the largest positive contribution in 2022 (1.5 percentage points), 
led by professional, scientific, and technical services (0.3 percentage point)
and accommodation and food services (0.3 percentage point). Of note is labor
input of the service providing sector being the leading contributor to the
aggregate output growth for both 2021 and 2022. The service providing 
sector recovered in 2021 from the effects of the COVID-19 pandemic and 
contributed 1.9 percentage points to output in 2021 and continues to have
positive contribution in 2022. The two most recent business cycles saw 
similar positive contributions in 3 of 4 sectors.
(See tables 6 through 10.)

Capital’s contribution to output

Capital input’s positive contribution in 2020, 2021, and 2022 reflects 
the stability of capital stock after downturns. All sectors experienced 
positive capital contributions to output growth in 2022 
(1.1 percentage point). The service providing sector was the largest 
positive contribution (0.4 percentage point), led by wholesale trade 
(0.1 percentage point) and retail trade (0.1 percentage point)
industries. 

Capital continues to have similar positive contributions for the last
3 years and the two most recent business cycles. (See tables 6 through 10.) 
The ICT sector increased its contribution of capital to output from 0.2 
percentage point in the 2007-19 business cycle to 0.3 percentage point 
in the 2019-22 business cycle primarily driven by the data processing, 
internet publishing, and other information services industry, which grew
from 0.09 percentage point to 0.14 percentage point.