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

Total Factor Productivity Major Industry Contributions to Output

Data For Charts

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

Using the growth accounting identities, the nation's private business output growth can be decomposed into the contributions of labor input, capital input, and total factor productivity growth. In 2022, positive contributions from labor input and capital input were offset by the large decline in TFP, leading to minimal output growth for the private business sector.

Chart data are included in the linked table above. 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 four broad sectors that encompass the private business economy: goods producing; information and communication technology (ICT); finance, insurance, and real estate (FIRE); and service providing. Looking at these sectors provides further insights to the drivers of economic growth in 2022 compared to 2021, the year following the COVID-19 recession.

Expand to view Sector-Industry composition table.

TFP's contribution to output

Total factor productivity was a negative contribution to output growth in 2022 with a -2.26-percentage points contribution, the lowest contribution in the series. This contrasts with 2021 when TFP experienced its highest contribution in the series with a 3.16 percentage point contribution. Three out of four of the broad sectors’ TFP turned down from a positive contribution to growth in 2021 to a decline in contribution in 2022, with the ICT sector being the only sector to have remained a positive contribution in 2022. (See Chart 2.) However, the ICT sector’s contribution of 0.01 percentage points in 2022 was significantly less than the 0.66-percentage point contribution in 2021. The 2022 decline in contribution was driven by the computer and electronic products industry declining from 2021 by 0.22 percentage point.

Service providing’s TFP contribution in 2021, while significant at 1.48 percentage point, declined to -0.71 percentage point in 2022. The large negative contribution in 2022 can be attributed to the negative contribution from the wholesale and retail trade industries. Within the good producing sector, the main negative contributors in 2022 were the construction industry with -0.57 percentage point followed by the oil and gas extraction industry with -0.37 percentage point.

Chart data are included in the linked table above. 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 positive contribution to output growth in 2022 continued to remain nearly as strong as it did in 2021 with a contribution of 2.40 percentage points. All four broad sectors had positive contributions in both years.

As with TFP contributions, the service providing sector had the largest positive labor input contribution in 2022 of 1.58 percentage points. The main upward driver of this sector was the professional, scientific, and technical services major industry with a positive contribution of 0.41 percentage point. Within this major industry, the miscellaneous professional, scientific, and technical services industry accounted for over 80% of this increase with a contribution of 0.33 percentage point. The consistent positive contribution from 2021 to 2022 demonstrates that industries are re-hiring labor lost in 2020.

Chart data are included in the linked table above. 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 2022 continued to rise past the previous year’s trends with a contribution of 1.06 percentage points. All sectors demonstrated a positive contribution of capital to output growth in 2022 driven by growth in the service providing sector (0.27 percentage point in 2021 to 0.40 percentage point in 2022).

The contribution of the service providing sector in 2022 was driven by increases in the wholesale and retail trade industries with contributions of 0.11 and 0.9 percentage point, respectively. Within the ICT sector, the data processing, internet publishing, and other information services industry contributed the most to output growth in 2022 with a contribution of 0.16 percentage point.

Chart data are included in the linked table above. Stacked bar chart of the percentage point capital contributions to output growth by sectors in private business.

How to use contributions

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.

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
Input Contributions to Output Growth 1990-2000 2000-2007 2007-2019

Private Business Output Growth*

4.00% 2.80% 2.10%

Capital

1.39 1.09 0.86

Labor

1.35 0.23 0.53

TFP

0.90 1.10 0.42

*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 cycles 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
Sector TFP Contributions to Private Business Output Growth 1990-2000 2000-2007 2007-2019

Private Business TFP Contribution

0.90 1.10 0.42

Sector Sums

0.90 1.10 0.42

Agriculture, Forestry, and Fishery

0.06 0.02 0.02

Mine, Util, Cons

-0.07 -0.04 0.00

Manufacturing Sector

0.57 0.57 -0.08

Trade

0.49 0.19 0.12

Transportation and Warehousing

0.08 0.07 0.00

Information

-0.08 0.32 0.10

Finance, Insurance, and Real Estate

-0.01 -0.07 0.03

Professional and business services

-0.11 0.10 0.19

Educational services, health care, and social assistance

-0.11 -0.01 0.04

Arts, recreation, entertainment, accommodation, and food services

0.03 0.01 0.02

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 the main driver of the aggregate sector and has positively impacted the nation’s productivity growth over the last two business cycles.

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

FIRE TFP Contributions Private Business Output Growth

-0.01 -0.07 0.03

Sub-Sector Sums

-0.01 -0.07 0.03

Finance and insurance

0.10 -0.09 -0.04

Real estate and rental and leasing

-0.11 0.02 0.08

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

FIRE TFP Contributions Private Business Output Growth

-0.01 -0.07 0.03

Finance and insurance

0.10 -0.09 -0.04

Industry Sums

0.10 -0.09 -0.04

Federal Reserve banks, credit intermediation, and related activities

-0.06 -0.18 0.06

Securities, commodity contracts, and investments

0.14 0.03 -0.06

Insurance carriers and related activities

0.05 0.05 -0.04

Funds, trusts, and other financial vehicles

-0.02 0.01 0.00

Real estate and rental and leasing

-0.11 0.02 0.08

Industry Sums

-0.11 0.02 0.08

Real estate

-0.01 0.07 0.06

Rental and leasing services and lessors of intangible assets

-0.10 -0.05 0.02

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 March, 21 2024.

Contact

For further information, contact the Productivity program.

Last Modified Date: March 21, 2024