1994 First Quarter (Revised) Productivity and Costs

Historical release narrative reproduced from the official public-domain source. Statistical tables, standard technical appendices, administrative material and attendance rosters are omitted; formatting is adapted for reading. Figures retain the release's historical context and may have been revised. Consult the linked source for the complete document.

First Quarter 1994 Business, Nonfarm Business, Manufacturing, and Nonfinancial Corporations

The Bureau of Labor Statistics of the U.S. Department of Labor today reported revised productivity datajas measured by output per hour of all personsjfor the first quarter of 1994. The revised seasonally-adjusted annual rates of productivity change in the first quarter were:

1.1 percent in the business sector, and 1.3 percent in the nonfarm business sector.

In both sectors, productivity and output gains were much smaller than in the fourth quarter.

In manufacturing, productivity changes in the first quarter were:

6.9 percent in manufacturing, 8.5 percent in durable goods manufacturing, and 4.4 percent in nondurable goods manufacturing.

Although slower than during the fourth quarter of 1993, the strong first- quarter productivity advance in manufacturing reflects continued strong output growth in durable goods industries along with improved output growth among nondurables. Output and hours in manufacturing, which includes about 20 percent of U.S. business-sector employment, tend to change more from quarter to quarter than in the business and nonfarm business sectors. First-quarter measures are summarized in table A and appear in detail in tables 1 through 5.

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. Quarterly output measures for manufacturing reflect independent indexes of industrial production prepared by the Board of Governors of the Federal Reserve System. See Technical Notes for further information on data sources (page 9).

In nonfinancial corporations, productivity was unchanged in the first quarter of 1994, as both output and hours rose 3.5 percent (tables B and 6).

Business

From the fourth quarter of 1993 to the first quarter of 1994, business productivity increased at a 1.1 percent annual rate. Output rose 3.8 percent and hours of all persons engaged in the sector increased 2.6 percent (seasonally adjusted annual rates). The increase in hours reflected a large gain in employment and a decline in average weekly hours. During the fourth quarter of 1993, productivity had gone up 6.8 percent (as revised), and output and hours rose 9.6 and 2.6 percent, respectively (table 1).

Hourly compensation increased 5.3 percent during the first quarter of 1994, compared with a 2.5 percent rise in the fourth quarter of 1993. 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, increased at a 4.1 percent annual rate during the first quarter. This was the largest increase in these costs in a year, and it reversed the 4.1 percent decline of the fourth quarter of 1993.

Real hourly compensation, which takes into account changes in the Consumer Price Index for All Urban Consumers (CPI-U), increased at a 3.1 percent annual rate in the first quarter; it had fallen 0.5 percent in the fourth quarter of 1993. The first-quarter 1994 increase was the largest since 1990 (when a 3.2 percent increase was recorded in the second quarter).

The implicit price deflator for business output, which reflects changes in unit labor costs and unit nonlabor payments, increased 1.5 percent in the first quarter, compared with a 1.1 percent increase during the fourth quarter of 1993.

Nonfarm business

Productivity rose 1.3 percent in nonfarm businesses during the first quarter of 1994 as output rose 3.6 percent and hours of all persons increased 2.3 percent. During the fourth quarter of 1993, productivity rose 6.1 percent in nonfarm businesses, reflecting gains of 8.9 percent in output and 2.7 percent in hours (table 2).

Hourly compensation increased at a 5.3 percent annual rate in the first quarter, compared with a 2.5 percent increase one quarter earlier. When the rise in the CPI-U is taken into account, real hourly compensation rose 3.1 percent in the first quarter, the largest quarterly gain since 1987 (when a 4.3 percent gain was recorded in the fourth quarter). Unit labor costs rose 3.9 percent, compared with a 3.4 percent drop during the fourth quarter of 1993.

The implicit price deflator for nonfarm business output rose 1.2 percent in the first quarter, compared with a 0.6 percent rise one quarter earlier.

Manufacturing

Productivity increased 6.9 percent in manufacturing in the first quarter of 1994, as output rose 8.1 percent and hours of all persons increased 1.1 percent (seasonally adjusted annual rates). The increase in hours reflected a small increase in employment and a slight gain in average weekly hours. Productivity grew strongly in durable goods industries while rising more slowly in nondurables. Output gains in durable goods manufacturing were much greater than in nondurable goods industries (tables 4 and 5).

Hourly compensation of all manufacturing workers increased 5.1 percent during the first quarterjthe greatest such increase in more than 2 years. Real hourly compensation rose 2.9 percent when the increase in consumer prices is taken into account. This was the greatest increase since 1991 (when a 3.5 percent increase occurred in the fourth quarter).

Unit labor costs fell at a 1.7 percent annual rate in the first quarter of 1994, the eighth quarter of decline or no growth in the past 9 quarters. These costs had decreased 3.9 percent during the fourth quarter of 1993.

Percent change from preceding year

Nonfinancial corporations

Preliminary first-quarter 1994 measures of productivity and costs also were announced today for nonfinancial corporations (tables B and 6). Productivity was unchanged in the first quarter, as output and hours both increased 3.5 percent (seasonally adjusted annual rates). It was the first quarter in a year that productivity did not advance. In the fourth quarter of 1993, productivity had increased 5.7 percent. Nonfinancial corporations include are all corporations doing business in the United States, except banks, stock and commodity brokers, and finance and insurance agencies.

Hourly compensation increased 3.7 percent, or 1.6 percent in real terms when the rise in the CPI-U is taken into account (table 6).

Unit labor costs for nonfinancial corporations increased 3.7 percent in the first quarter, compared with a 3.4 percent drop in the fourth quarter of 1993, ending a period of 3 consecutive quarterly declines in this series. Unit nonlabor costs rose 7.1 percent, and unit profits fell 17.5 percent. During the fourth quarter of 1993, unit nonlabor costs fell 3.7 percent while unit profits rose 45.1 percent (annual rates). The implicit price deflator for nonfinancial corporate output rose 2.2 percent in the first quarter.

REVISED MEASURES

Current and previous changes for 1992-93 and for the first quarter of 1994 for business, nonfarm business, and manufacturing are compared in table D. The movements differ from those reported on May 5, mainly reflecting revisions to first-quarter sector output measures from the national income and product accounts, prepared by the Bureau of Economic Analysis of the U.S. Department of Commerce.

With this release of Productivity and Costs, labor input measures have been revised to reflect the regular annual benchmarking of employment levels derived from the monthly Current Employment Statistics survey to more comprehensive counts from unemployment insurance records. Revised seasonal adjustment factors computed for labor input measures also affected measures which depend on these series. Small changes in these series occurred in the years beginning with 1958, but the changes become more significant in 1989. See tables 1-6 and appendix tables 1-6 for the revised data for the years beginning with 1989.

The monthly Current Population Survey (CPS) is used to provide information on employment and average weekly hours of the self employed, farm employees, private household workers, and unpaid family workers. Average weekly hours collected in the CPS also are used in estimating total hours worked in government enterprises. The computation of about 17 percent of the hours expended to produce business sector output is based on data from the CPS. (The CPS is conducted each month from a sample of about 60,000 households nationwide.) In January 1994, a major redesign of the CPS was implemented and new population controls were introduced. The redesign of the CPS, which improved the accuracy of the monthly labor force and employment information, is explained in several articles in the February 1994 issue of Employment and Earnings, and this new information was incorporated in productivity and cost measures released on May 5. The May 5 Productivity and Costs release (USDL 94-234) included a discussion of difficulties encountered in incorporating information from the redesigned CPS into productivity and cost measures.