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Productivity
Bureau of Labor Statistics > Productivity > Publications > Productivity Highlights

Total Factor Productivity Major Industry Contributions to Output

Announcement
  • The BLS Productivity program replaced the term multifactor productivity (MFP) with total factor productivity (TFP) in November 2021. This was a change in terminology only and will not affect the data or methodology used in computing the measures. The use of the term “total factor productivity” will improve the visibility and accessibility of our data and was accompanied by changes to the BLS website and will be adopted in all future productivity news releases.

Contributions To Output Growth

Data For Charts

See the contributions data presented in these charts and industry-level data.

Using the growth accounting identities, the nation's output growth can be decomposed into the contributions of labor input, capital services, and total factor productivity growth. The large TFP and labor input increases among industries in 2021 led to an overall rise in output growth for the private business sector. The charts that follow illustrate the drivers of the economic rebound in output growth over a select time-period by examining the contributions of 8 aggregate sectors that encompass the private business economy.

stacked bar chart of the percentage point contributions (of capital, labor, and TFP) to output growth in private business since 2007

 

The charts that follow examine in more detail the impact of TFP, labor input and capital input through the contributions of 8 aggregate sectors that encompass the private business economy. Looking at these sectors provides further insights on how the U.S. recovered in 2021, the year following the Covid-19 recession, compared to the year after the Great Recession of 2008 and 2009.

  • Agriculture, Forestry, and Fishery (Ag)
  • Mining, Utilities, and Construction (Mine, Util, Cons)
  • Manufacturing (Manf)
  • Trade
  • Transportation and Warehousing (Trans & Ware)
  • Information
  • Finance, Insurance, and Real Estate (FIRE)
  • Services

TFP's contribution to output

Total factor productivity’s contribution to output growth in 2010 and 2021 were the two highest contributions (2.90 and 4.19 percentage points, respectively) in the series since 2002. The years are similar in that almost all sectors’ TFP had a positive contribution to growth, but the magnitude of services and manufacturing contributions differentiate in the recession recovery years.

Service sector TFP experienced unprecedent contributions in 2021 and its 2.22 percentage point contribution was almost 4 times its contribution in 2010. Customer facing industries such as food services and drinking places, miscellaneous professional, scientific, and technical services, and accommodation experienced their highest TFP contributions in the series in 2021, with 0.48, 0.43 and 0.16 percentage point, respectively.

Manufacturing’s TFP contribution in 2021, while significant at 0.90 percentage point, was a third less than its contribution of 1.30 percentage points in 2010. The lower contribution in 2021 can be attributed to smaller contributions from the computer and electronic products, motor vehicles, and petroleum and coal products industries.

stacked bar chart of the percentage point contributions of total factor productivity contributions to output growth by sectors in private business

 

Labor input's contribution to output

Labor input’s contribution to private business output had different effects in 2021 and 2010. There were positive contributions by all sectors in 2021, with 48 of 61 industries having positive labor input contributions. This is in contrast to 2010 when labor was slower to recover from the Great Recession of 2008 and 2009, and where the trade, information, FIRE and mining, utilities, and construction sectors all had negative labor input contributions.

As with TFP contributions, the services sector had the largest positive labor input contribution in 2021 of 1.26 percentage points. The main upward driver of this sector was the professional, scientific, and technical services major industry with a positive contribution of 0.39 percentage point. Within this major industry, the miscellaneous professional, scientific, and technical services industry accounted for almost 65% of this increase with a contribution of 0.25 percentage point.

While 2010 and 2021 both experienced positive labor input contributions following a recession, neither rebound was large enough to offset the decline during the two recession periods. Labor input’s contribution to private business output was -1.59 percentage points for the 2007-2010 time period, and -0.34 percentage point for the 2019-2021 time period. The negative contribution for 2019-2021 period demonstrates that most industries have yet to re-hire labor lost in 2020.

stacked bar chart of percentage point labor contributions to output growth by sectors in private business

 

Capital's contribution to output

Capital input’s positive contribution to output growth in 2021 continued to remain nearly as strong as it did during the COVID-19 pandemic year of 2020 with a contribution of 0.87 percentage point. All sectors demonstrated a positive contribution of capital to output growth in 2021, however, the FIRE sector had opposite contributions in the post-recession years of 2010 and 2021.

The contribution of the FIRE sector in 2021 was driven by the insurance, real estate, and banking industries with contributions of 0.10, 0.05 and 0.03 percentage point, respectively. In 2010, these three industries combined had a contribution of -0.05 illustrating the different effects of the two recessions on this sector. Within the Information sector, the data processing, internet publishing, and other information services industry contributed the most to output growth in 2021 with a contribution of 0.16 percentage points compared to a 0.08 percentage point contribution in 2010.

stacked bar chart of the percentage point capital contributions to output growth by sectors in private business

About

Contributions of factors of production are calculated as the natural log change in the factor index weighted by its share of Private Business value added growth.

How to use contributions

For each factor input into the economy (total factor productivity, capital and labor) we can decompose output growth by its contributing input growth, by sector and industry. To demonstrate this we will focus on the contribution of TFP to private business output growth and drill down the change in contributions over the last 3 business cycles by the Finance, insurance, real estate, and leasing (FIRE) sector and the real estate industry.

First, let’s look at the contribution of each input to private business output growth. Table 1 shows us that the TFP contribution to the Private Business output growth has slowed in the last business cycle. We can see that the “slow” growth of output in this business cycle relative to previous cycles, has largely come from a deceleration in TFP’s contribution to growth.

Table 1.
Input Contributions to Output Growth 1990-2000 2000-2007 2007-2019

Private Business Output Growth*

4.0% 2.8% 2.0%

Capital

1.50 1.16 0.90

Labor

1.43 0.30 0.60

TFP

1.01 1.30 0.47

*Contributions may not sum due to aggregation, rounding, and integration of top line to industry.

Productivity growth has been a key ingredient to the growth in output, accounting for roughly a quarter of the growth in the current business cycle and the business cycle in the 1990’s (Table 1). While TFP growth accounts roughly accounts for the same percentage of growth, the source of growth in TFP between the business cycle in the 1990’s and the current business cycle have been significantly different (Table 2). For instance, the Finance Insurance and Real Estate Sector (FIRE) productivity growth went from being a drag on private business output growth in the last two business cycle to contributing positively in 2007-2019. Similarly, manufacturing was a solid contributor to growth until this most recent business cycle where Services have led the nation’s productivity growth.

Table 2.
Sector TFP Contributions to Private Business Output Growth 1990-2000 2000-2007 2007-2019

Private Business TFP Contribution

1.01 1.30 0.45

Sector Sums

0.87 1.06 0.33

Agriculture, Forestry, and Fishery

0.06 0.02 0.02

Mine, Util, Cons

-0.07 -0.04 0.03

Manufacturing Sector

0.57 0.57 -0.06

Trade

0.50 0.19 0.00

Transportation and Warehousing

0.08 0.07 -0.01

Information

-0.08 0.32 0.09

Finance, Insurance, and Real Estate

-0.02 -0.07 0.06

Professional and business services

-0.10 0.09 0.19

Educational services, health care, and social assistance

-0.11 -0.02 0.03

Arts, entertainment, and recreation

0.00 -0.01 0.01

Other services, except government

0.04 -0.06 -0.02

Using the FIRE sector as an example, the subsectors in FIRE are: Finance and insurance and Real estate and rental and leasing. Table 3 illustrates that within FIRE, the Real estate and rental and leasing subsector is main driver of the aggregate sector and has positively impacted the nation’s productivity growth over the last to business cycles.

Table 3.
Sub-Sector TFP Contributions to Private Business Output Growth 1990-2000 2000-2007 2007-2019

FIRE TFP Contributions Private Business Output Growth

-0.02 -0.07 0.06

Sub-Sector Sums

-0.02 -0.07 0.07

Finance and insurance

0.10 -0.09 0.00

Real estate and rental and leasing

-0.12 0.02 0.07

So now let’s ask the question: what industry within the Real estate and rental and leasing subsector is the main contributor to the subsectors rising importance in the economy’s productivity growth? Table 4 shows us that it’s all the Real Estate industry. Without the strong growth of this industry’s productivity growth, the subsector and sector it belongs to would be a drag on private business output growth.

Table 4.
Industry TFP Contributions to Private Business Output Growth 1990-2000 2000-2007 2007-2019

FIRE TFP Contributions Private Business Output Growth

-0.02 -0.07 0.06

Finance and insurance

0.10 -0.09 0.00

Industry Sums

0.10 -0.09 0.00

Federal Reserve banks, credit intermediation, and related activities

-0.06 -0.18 0.00

Securities, commodity contracts, and investments

0.14 0.03 -0.01

Insurance carriers and related activities

0.05 0.05 0.01

Funds, trusts, and other financial vehicles

-0.03 0.01 0.00

Real estate and rental and leasing

-0.12 0.02 0.07

Industry Sums

-0.12 0.02 0.07

Real estate

-0.02 0.07 0.06

Rental and leasing services and lessors of intangible assets

-0.10 -0.05 0.01

In this way, all the inputs to production can be viewed as a contribution to the nation’s private output growth. Industry capital and labor inputs can also be used to decompose output further by industry in a similar manner.

Note: The 8 sectors' data in this file are calculated using a KLEMS growth accounting framework. The source of sectoral output differs among industries and sectors. Output for manufacturing industries, mining and utilities, air transportation, information, and food and beverage industries constructed primarily using data from the Economic Censuses and Annual Surveys of the U.S. Census Bureau together with data on price changes from BLS. Other data sources include: the Energy Information Administration, U.S. Department of Energy; and the Bureau of Transportation Statistics, U.S. Department of Transportation. For all other nonmanufacturing industries, sectoral output is based on indexes of real quantity and cost measures from the Bureau of Economic Analysis (BEA). Due to the different methods of measuring output growth through the use of natural logs, contributions of each factor will not sum directly to the factor growth of the private business sector.

Data in this file are consistent with tables and data released on November, 18 2022.

Contact

For further information, contact the Productivity program.