1993 Fourth-Quarter and Annual Averages (Revised) Productivity and Costs

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Fourth-Quarter and Annual Averages, 1993

The Bureau of Labor Statistics of the U.S. Department of Labor today reported revised fourth-quarter seasonally-adjusted annual rates of productivity changejas measured by output per hour of all personsjand revised annual changes for the full year 1993. In the fourth quarter, productivity increased briskly in business, nonfarm business, and manufacturing with the strongest gains recorded in durable goods manufacturing (table A). Unit labor costs declined in all sectors except nondurable manufacturing in the fourth quarter, partly reflecting the strong gains in productivity. Fourth-quarter measures are summarized in table A and appear in detail in tables 1 through 5. The changes in business and nonfarm business productivity were:

On an annual basis, productivity in business and nonfarm business rose moderately in 1993. The pace of output growth picked up, increasing more rapidly in 1993 than in 1992 in both sectors, and hours of labor input increased for the first time since 1990.

Growth in manufacturing productivity in 1993 reflected faster output growth than during 1992. A small decline in hours of labor input extended the downward trend which began in 1990. The changes in manufacturing were:

Output measures for business and nonfarm business are based on measures of gross domestic product prepared by the Bureau of Economic Analysis of the U.S. Department of Commerce. Output measures for manufacturing reflect independent indexes of industrial production prepared by the Board of Governors of the Federal Reserve System. See Technical Notes (page 7) for further information on data sources.

THIRD-TO-FOURTH QUARTER CHANGES, 1993 Business

Productivity increased strongly during the fourth quarter of 1993 in the business sector. The 6.9 percent gain reflected output growth at a 9.3 percent annual rate while hours of all persons engaged in the sector increased 2.2 percent (seasonally adjusted). The increase in productivity was the largest since 1983 (when a 7.5 percent increase was recorded in the second quarter), and the gain in output the largest since 1984 (when it rose 11.5 percent in the first quarter). During the third quarter of 1993, business productivity had increased 3.3 percent; output grew 3.2 percent, and hours fell 0.1 percent (table 1).

Hourly compensation increased at a 2.9 percent annual rate during the fourth quarter of 1993, compared with a 3.9 percent increase during the third quarter. This measure includes wages and salaries, supplements, employer contributions to employee-benefit plans, and taxes. Unit labor costs, which reflect changes in hourly compensation and productivity, decreased at a 3.8 percent annual rate during the fourth quarter, compared with a 0.5 percent increase one quarter earlier. The decline in unit labor costs partly reflects the faster gains in productivity in the fourth quarter. It was the first decrease in this series since the first quarter of 1988 and the largest since 1955.

Real hourly compensation, which takes into account changes in the Consumer Price Index for All Urban Consumers (CPI-U), showed a slight 0.1 percent decline in the fourth quarter of 1993 for persons in the business sector, compared with a 2.0 percent gain in the third quarter.

The implicit price deflator for business output, which reflects changes in unit labor costs and unit nonlabor payments, increased at a 1.0 percent annual rate in the fourth quarter. During the third quarter, prices of the goods and services which comprise business output had increased at a 1.1 percent rate.

Nonfarm business

In the nonfarm business sector, productivity gained 6.1 percent in the fourth quarter. Output jumped 8.6 percent (the largest gain since a 10.3 percent gain in the first quarter of 1984), and hours of all personsjemployees, proprietors, and unpaid family workersjrose 2.3 percent. The change in hours resulted from a 1.5 percent increase in employment and a 0.7 percent increase in the average workweek. During the third quarter, nonfarm productivity had increased 4.0 percent as output grew 4.1 percent and hours edged up 0.1 percent (table 2).

Hourly compensation rose 2.8 percent in the fourth quarter, but real compensation was off a slight 0.1 percent when the increase in the CPI-U was taken into account. During the third quarter, hourly compensation had increased by 3.7 percent, and real hourly compensation by 1.8 percent. Unit labor costs fell 3.1 percent in the fourth quarter, compared with a 0.4 percent decrease during the third quarter. The was the first 2-quarter decline in these costs since 1962.

The implicit price deflator for nonfarm business output rose 0.5 percent in the fourth quarter, compared with a 1.1 percent increase one quarter earlier.

Manufacturing

Manufacturing productivity rose at a 7.2 percent seasonally adjusted annual rate in the fourth quarter of 1993, compared with a 3.0 percent increase in the third quarter. Output rose a robust 8.6 percent in the fourth quarter, and hours of all persons increased 1.3 percent. The increases in productivity and output were the largest since the second quarter of 1987, when productivity rose 10.7 percent and output increased 10.6 percent. The fourth-quarter 1993 increase in hours followed declines in the second and third quarters (table 3). The increase in manufacturing productivity was virtually confined to the durable goods sector; only a small gain occurred in nondurables (tables 4 and 5).

Hourly compensation of all manufacturing workers increased 3.1 percent during the fourth quarter, but edged up a scant 0.1 percent when the increase in consumer prices was taken into account. Unit labor costs fell at a 3.8 percent annual rate in the fourth quarter of 1993, compared with a 0.3 percent increase during the third quarter.

ANNUAL AVERAGE CHANGES, 1992-1993

Business

When the annual averages for 1993 and 1992 are compared, business productivity increased 1.8 percent. In 1992, productivity had grown 3.3 percent. Output grew 3.6 percent in 1993, and hours of all persons engaged in the sector increased 1.8 percent (table B).

Hourly compensation increased 3.8 percent in 1993, compared with a 5.0 percent increase during 1992. Real hourly compensation increased 0.8 percent in 1993, compared with a 2.0 percent rise in 1992.

Unit labor costs increased 2.0 percent during 1993, compared with a 1.7 percent increase a year earlier. These costs grew more in 1993 than in 1992, despite the lower increases in hourly compensation, because productivity grew less.

Nonfarm business

Productivity increased 1.7 percent in the nonfarm business sector during 1993, as output rose 3.8 percent and hours of all persons increased 2.1 percent. The increase in labor input in 1993 was the first annual gain in the series since 1990. In 1992, productivity had risen 3.1 percent, as output rose 2.7 percent and hours fell 0.4 percent. Hourly compensation rose 3.6 percent in 1993, compared with a 5.1 percent increase in 1992. Real hourly compensation increased 0.6 percent, down from a 2.0 percent rise in 1992.

Unit labor costs in the nonfarm business sector grew 1.8 percent in 1993 and 2.0 percent in 1992, reflecting a slowing of both productivity growth and hourly compensation gains from 1992 to 1993.

Manufacturing

Manufacturing productivity grew 5.1 percent in 1993, as output rose 4.7 percent and hours of all persons declined 0.3 percent. During 1992, productivity rose 4.2 percent; output rose 3.1 percent, and hours decreased 1.1 percent. The increase in manufacturing productivity in 1993 was the largest since 1987, the output gain the largest since 1988, and the drop in hours the smallest of four consecutive declines.

Hourly compensation of manufacturing workers increased 2.8 percent during 1993, but was down 0.2 percent when the increase in consumer prices was taken into account. Unit labor costs fell 2.2 percent in 1993, the first such decline since 1987, reflecting both faster productivity growth and a smaller gain in compensation per hour than in 1992.

Both durable and nondurable goods industries experienced productivity increases in 1993. The very large gain among durable goods producers reflected strong output growth and a decline in hours; however, in nondurable goods industries, both output and hours growth were modest in 1993 (tables 4 and 5).

Revised measures

Productivity and cost measures for the fourth quarter and full year 1993 for business, nonfarm business, and manufacturing, which were revised to incorporate the most recent information, were somewhat different from the preliminary results announced on February 8. Owing to upward revisions to the underlying output series prepared by the Bureau of Economic Analysis of the Department of Commerce, business and nonfarm business productivity grew more rapidly when more complete information was used. For example, nonfarm productivity grew at an annual rate of 6.1 percent in the fourth quarter, compared with the previously-announced growth rate of 4.2 percent (table B).

In manufacturing, revised indexes of industrial production prepared by the Board of Governors of the Federal Reserve Bank underlie BLS manufacturing output measures. (For details on the revision, see Federal Reserve Statistical Release G.17 (419) Supplement, February 4.) These changes are reflected in revised manufacturing productivity and related measures. Appendix tables 1-3 show the effects of the revisions for 1991. Prior to 1991, the productivity effects are negligible.

Measures of real hourly compensation for all sectors reflect the Consumer Price Index for All Urban Consumers used in their computation. Revisions in the CPI, due to updated and modified seasonal adjustment factors and procedures, were announced February 17 (USDL 94-86). Measures for 1989 forward were affected.