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Productivity
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State Labor Productivity: productivity trends in California, Florida, New York, and Texas
This webpage takes a closer look at trends in the latest state-level labor productivity and cost measures through 2023. The emphasis in this year’s review is to compare productivity in the four largest U.S. states by GDP – California, Texas, New York, and Florida.
The Bureau of Labor Statistics (BLS) released updates to the state-level data for the private nonfarm sector on May 30, 2024. Data series in the release include labor productivity, output, hours worked, unit labor costs, hourly compensation, and employment. The data cover 50 states and the District of Columbia, and four Census regions, from 2007 to 2023. By analyzing state-level labor productivity measures, data users can learn more about regional business cycles, the persistence of regional income inequality, and which states are driving national productivity trends.
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This webpage examines long term trends in labor productivity across four of the largest states by GDP. It then breaks down productivity into output and hours in each business cycle and examines trends in labor productivity in the most recent year.
California’s long-term productivity growth outpaced other large states
Chart 1 presents trends in productivity growth for the top four states by GDP and for the national private nonfarm sector from 2007 to 2023. Across the entire period, California had consistent productivity growth, declining only in 2022. California diverged from the other three states and the national trend with productivity growth of 2.2 percent per year, significantly higher than the national growth rate of 1.3 percent.[1] Conversely, Florida’s growth in productivity lagged the other states and the nation from 2012 until 2021 but converged to the national trend by 2023. New York, Texas, and Florida all grew by 1.2 percent per year, just below the national growth rate.
Florida experienced the largest acceleration in productivity growth since 2019
Chart 2 illustrates productivity growth for the nation and the four largest states by GDP over the two recent business cycles. California’s rapid growth began during the earlier business cycle from 2007 to 2019. Florida’s productivity growth lagged the other states and the nation with 0.8 percent annual growth over the 2007-19 period. New York and Texas closely followed the national trend of 1.3 percent growth per year from 2007 to 2019. In the 2019-23 period, California and Florida’s productivity growth accelerated. Productivity growth in Florida was the greatest among these four states from 2019 to 2023 with 2.5 percent growth per year. Although productivity growth was positive, both New York and Texas experienced diminished productivity growth from 2019 to 2023 relative to the earlier period.
Trends in output and hours varied by state
Table 1 provides growth in productivity, output, and hours worked for the nation and each of the four states from 2007 to 2019 and from 2019 to 2023. In California and Florida, the observed acceleration in productivity in chart 2 was the result of differing underlying trends in output and hours. The acceleration of output growth in Florida outweighed its growth in hours worked. However, in California a deceleration in the growth of hours worked led to the observed acceleration in productivity growth. In New York, output and hours worked continued to grow, but at a decelerated rate compared to the earlier period. Conversely, in Texas hours worked growth accelerated from 2019 to 2023 while output growth decelerated only slightly.
| Geography | Productivity | Output | Hours worked | |||
|---|---|---|---|---|---|---|
| 2007-19 | 2019-23 | 2007-19 | 2019-23 | 2007-19 | 2019-23 | |
|
National (private nonfarm) |
1.3% | 1.4% | 1.9% | 2.1% | 0.6% | 0.6% |
|
California |
2.1% | 2.4% | 2.9% | 2.5% | 0.7% | 0.1% |
|
Florida |
0.8% | 2.5% | 1.6% | 4.6% | 0.7% | 2.0% |
|
New York |
1.3% | 0.9% | 2.0% | 1.0% | 0.7% | 0.1% |
|
Texas |
1.3% | 0.6% | 3.0% | 2.8% | 1.7% | 2.1% |
|
Source: U.S. Bureau of Labor Statistics |
||||||
Professional business services grew in Texas and Florida while information remains prominent in California
Charts 3 to 6 examine a selection of the underlying trends in output for some of the prominent industries within each of the four states. Professional business services was among the largest industry in each one (Chart 3). Strong output growth of 8.9 percent per year in this industry was an important factor in Florida’s 4.6 percent statewide output growth in the 2019-23 business cycle. Texas also experienced strong growth in output in this industry with 6.9 percent annual growth since 2019.
Growth in finance, insurance, real estate, rental and leasing (FIRE) also contributed to strong growth in Florida and Texas (Chart 4). Output in FIRE in these states grew by 5 percent and 7 percent per year, respectively, over the 2019-23 business cycle. Conversely, output in FIRE grew at slower pace in California and New York, particularly in New York where FIRE experienced a decline of 3.7 percent in 2023.
Information is a particularly important industry for California where it has grown consistently since 2009. In the 2019-23 period, output in this industry grew in California by 9.0 percent per year.
Trade is also a prominent industry in each of these states. In Florida and Texas, trade grew by a modest 2.4 percent and 1.1 percent per year respectively over the most recent business cycle. Conversely, this industry had declining output in New York and California where trade fell over the same period by 2.2 percent and 0.9 percent per year respectively, contributing to decelerating output in New York in the 2019 to 2023 period.
Florida and Texas experienced strong output and productivity growth in 2023
Chart 7 depicts the trends in productivity, output, and hours worked in 2023 for each of the four states as well as the national trends. In Florida and Texas, strong output growth drove increases in productivity. For these two states, output growth in 2003 outpaced every other year since 2007, except for 2021 during the immediate recovery from the global pandemic. Growth in critical sectors in these states, including trade and FIRE, contributed to this strong output growth. Output growth in California and New York was weaker, growing by 1.9 percent in California despite strong growth in information, and by 0.5 percent in New York, due partly to declining output in trade and FIRE. Notably, falling hours worked counteracted weak output growth and contributed to California’s growth in productivity in 2023.
Frequently asked questions
1. How is output measured for states?
BLS state-level measures of output for the private nonfarm sector are created using GDP by state and industry data published by the Bureau of Economic Analysis (BEA). BEA does not produce a private nonfarm sector measure of real output by state. To create the necessary output series, BLS subtracts several industry components — the farm sector, private households, and owner-occupied housing — from GDP by state using a Fisher ideal index formula. See the output subsection of the Monthly Labor Review (MLR) article, "BLS Publishes Experimental State-level Labor Productivity Measures," for more information on BEA's methods for nominal and real measures of GDP by state.
2. How are work hours measured for states?
Hours worked are the number of hours worked by all employed persons, including wage and salary workers, self-employed persons, and unpaid family workers. Hours for wage and salary workers are primarily from BLS Current Employment Statistics (CES) and hours for self-employed and unpaid family workers are from the BLS Current Population Survey (CPS). The hours are adjusted from an hours paid basis to an hours worked basis using data from the BLS National Compensation Survey (NCS). Hours are also adjusted to account for work that is done “off the clock” that is not reported by employers. See the hours subsection of the MLR article for more information.
3. What is different between how BLS constructs state-level and national labor productivity measures?
The state-level measures cover the private nonfarm sector which adjusts the nonfarm business sector used in national productivity measurement by adding nonprofit institutions serving households and removing government enterprises.
4. Does BLS have data on industry productivity by state?
At this time, BLS does not have measures of industry productivity by state. However, it is possible to construct measures of output and hours worked, respectively, by state and industry using the data sources provided in the MLR article.
Notes
[1]Annual Percent Change: The annual percent change is the change in a series from one year to the next as a percent of the series-value in the previous year. Over a period of more than one year, the annual percent change is the compound annual growth rate in an index series, or an annualized average growth rate. Because the change of an index series varies from year to year, the annual percent change for a long time period reflects the constant rate that can be applied to each year in a period, from the start to the end, that would give the same total result. It is calculated as (Ending Value/Starting Value)^(1/Number of Years)–1.
Last Modified Date: July 18, 2024