Total Factor Productivity for Major Industries – 2023

For release 10:00 a.m. (ET) Wednesday, December 4, 2024						USDL-24-2365
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 – 2023

Total factor productivity (TFP) increased in 12 out of 21 major industries in 2023, the U.S. Bureau of Labor 
Statistics reported today, led by the mining and retail trade industries. The TFP increases in 2023 were driven by 
output growth outpacing the growth in combined inputs of capital, labor, and the intermediate inputs of energy, 
materials, and services.

Output increased in 16 of 21 major industries in 2023. Among the top 4 TFP growth industries, output grew 
while combined inputs declined. Within these four industries (mining; retail trade; agriculture, forestry, fishing, 
and hunting; and utilities) intermediate inputs drove the combined inputs decline. (See table 1.)

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		Methodology Change Regarding Taxes and Subsidies in TFP Related Measures
Data in this release reflect an improved treatment of taxes and subsidies in TFP related measures. New source
data and methods have been introduced to improve the removal of net taxes on product from measured output
and improve the allocation of net taxes on production to measured capital and labor inputs. Background on the
method can be found at www.bls.gov/productivity/technical-notes/taxes-and-subsidies-method-improvementfor-
total-factor-productivity.htm.
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Over the current 2019-23 business cycle, 12 of 21 industries experienced TFP growth, while TFP declined in 9 industries. 
Output growth was positive in 18 of 21 industries over the period, indicating that output is above its 2019 level. 
Output in the remaining 3 industries (manufacturing, durable manufacturing, and nondurable manufacturing) is 
still below pre-COVID-19 pandemic levels. Labor input has grown in 17 of 21 industries during the 2019-23 
cycle, demonstrating that these industries have recovered from labor losses in 2020. (See table 3.)

TFP 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

Labor productivity increased in 16 of 21 industries in 2023 as output growth outpaced the growth of hours 
worked. Labor productivity can be expressed as the sum of six components: TFP growth and the contributions of 
capital intensity, labor composition, energy intensity, materials intensity, and 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 16 industries with labor productivity growth in 2023, TFP was the largest contributor in 8 industries.  
TFP’s contribution to labor productivity growth was particularly strong in mining and retail trade industries. 
Service intensity made a significant contribution to the 6.4 percent growth in labor productivity for the 
educational services industry. Service intensity also made notable positive contributions to labor productivity 
growth in the finance and insurance and other services, except government industries. The labor composition 
index estimates the effect of shifts in the composition of the workforce on hours worked, using information on 
age, education, gender, and relative wages as a proxy for experience. In 2023, 14 of the 21 industries measured 
had negative or no contribution from labor composition.

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 driver of output growth for the 
private business sector in 2023 was capital with a 1.1-percentage-point contribution. TFP and labor input each 
contributed 0.7-percentage-point.

Productivity growth is often viewed as a long run measure, encompassing many economic shocks like the 
COVID-19 pandemic. While TFP growth and contributions of capital and labor have been volatile over the last 4 
years, the current business cycle of 2019-23 shows similar contributions to aggregate output growth as 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 into how different sectors of the economy contribute to output. (See 
technical notes for industry makeup of each sector.)

TFP’s contribution to output

Total factor productivity’s contribution to private business output rebounded from a negative 1.6-percentage-point 
contribution in 2022 to a positive 0.7-percentage-point contribution to output growth in 2023. The 2.3-percentage-
point change in TFP’s contribution to output is due in large part to service-providing industries, as their 
contribution increased from negative 0.4-percentage-point in 2022 to positive 0.9-percentage-point in 2023. The 
strong service-providing sector upturn was driven by the retail trade industry (0.8-percentage-point). TFP in the 
goods-producing sector had a negative contribution (-0.3-percentage-point) to private business output in 2023 and 
is the only sector with a negative contribution in the 2019-23 business cycle. (See tables 6-11.)

Labor’s contribution to output

Labor’s significant decrease in contribution to private business output growth from 2.5-percentage-points in 2022 
to 0.7-percentage-point in 2023 was due to contribution declines in all four sectors. The service-providing sector 
contribution declined from 1.6-percentage-points in 2022 to 0.5-percentage-point in 2023 due to large declines in 
contributions from the professional and technical services industry (0.3-percentage-point in 2022 to 0.1-
percentage-point in 2023). Looking at the business cycle of 2019-23, labor’s 0.7-percentage-point contribution in 
2023 is in line with the current business cycle’s contribution. (See tables 6-11.)

Capital’s contribution to output

All sectors experienced positive capital contributions to private business output growth in 2023 (1.1-percentage-
point). The service-providing sector made the largest positive contribution (0.5-percentage-point), led by 
wholesale trade (0.1-percentage-point) and retail trade (0.1-percentage-point) industries.

Capital had similar positive contributions for the years 2020 to 2023 and the two most recent business cycles. The 
slight increase in capital contribution from the service-providing sector from the 2007-19 business cycle to the 
2019-23 business cycle (0.3-percentage-point to 0.4-percentage-point, respectively) was driven by the retail trade 
industry (0.0-percentage point to 0.1-percentage-point, respectively). (See tables 6-11.)