1994 Third 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.

Third Quarter 1994

The Bureau of Labor Statistics of the U.S. Department of Labor today reported revised productivity data-as measured by output per hour of all persons-for the third quarter of 1994. The seasonally-adjusted annual rates of productivity growth in the third quarter were:

3.5 percent in the business sector, and 2.9 percent in the nonfarm business sector.

In both the business and the nonfarm business sectors, productivity increases in the third quarter followed second-quarter declines. Although output in both sectors increased faster in the third quarter than in the second, the increase in hours of all persons slowed substantially.

In manufacturing, revised productivity increases in the third quarter were:

3.6 percent in manufacturing, 5.0 percent in durable goods manufacturing, and 1.4 percent in nondurable goods manufacturing.

The third-quarter increase in productivity in the manufacturing sector was lower than that recorded in the second quarter. In the nondurable goods sector, third-quarter productivity and output increases were significantly slower than they had been in the previous quarter. In the larger durable goods sector, however, productivity growth in the third quarter was only slightly less than in the second quarter. Manufacturing includes nearly 20 percent of U.S. business sector employment. Third-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 8).

Business

From the second quarter to the third quarter of 1994, business sector productivity increased at a 3.5 percent annual rate. As revised, output rose 4.4 percent, and hours of all persons engaged in the sector increased 0.9 percent (seasonally adjusted annual rates). During the second quarter of 1994, productivity had declined 2.0 percent, as output and hours rose by 3.7 and 5.9 percent, respectively (table 1).

Hourly compensation increased 3.4 percent during the third quarter of 1994, compared with a 0.2 percent rise in the second quarter. This measure includes wages and salaries, supplements, employer contributions to employee benefit plans, and taxes. Unit labor costs, reflecting similar movements in hourly compensation and productivity, were unchanged in the third quarter. During the previous quarter, these costs had increased 2.3 percent.

Real hourly compensation, which takes into account changes in the Consumer Price Index for All Urban Consumers (CPI-U), decreased 0.1 percent in the third quarter after falling 2.5 percent in the second quarter of 1994.

The implicit price deflator for the business sector, which reflects changes in unit labor costs and unit nonlabor payments, increased at a 1.8 percent annual rate in the third quarter, compared with a 3.5 percent increase during the second quarter of 1994.

Nonfarm business

Productivity rose 2.9 percent in the nonfarm business sector during the third quarter of 1994 as output rose 4.2 percent and hours of all persons increased 1.2 percent. During the second quarter of 1994, productivity had fallen 2.1 percent in the nonfarm business sector, reflecting gains of 3.2 percent in output and 5.5 percent in hours (table 2).

Hourly compensation increased at a 3.0 percent annual rate in the third quarter, compared with a 0.7 percent increase one quarter earlier. When the rise in the CPI-U is taken into account, real hourly compensation fell at a 0.6 percent annual rate in the third quarter. Real hourly compensation has declined in 5 of the last 7 quarters and is now about the same as it was in the fourth quarter of 1992. Unit labor costs were unchanged in the third quarter after rising 2.9 percent during the second quarter of 1994.

The implicit price deflator for nonfarm business output rose 2.2 percent in the third quarter, compared with a 4.5 percent rise 1 quarter earlier.

Manufacturing

Productivity increased 3.6 percent in manufacturing in the third quarter of 1994, as output rose 5.7 percent and hours of all persons rose 2.0 percent (seasonally adjusted annual rates). Manufacturing productivity has now increased in every quarter since the first quarter of 1991 (when it declined 0.1 percent). Productivity grew more in the durable goods industries than among nondurable goods producers. Output and hours rose in both the durable and the nondurable goods sectors, but the increases in the durable goods sector were higher (tables 3, 4, and 5).

Hourly compensation of all manufacturing workers increased 3.0 percent during the third quarter, compared with a 1.4 percent decline during the second quarter (seasonally adjusted annual rates). Real hourly compensation fell 0.5 percent in the third quarter when the increase in the CPI-U is taken into account. During the second quarter, real hourly compensation had declined 4.1 percent.

Unit labor costs fell at a 0.6 percent annual rate in the third quarter of 1994. These costs had decreased 6.7 percent during the second quarter of 1994 and have now declined for 4 consecutive quarters.

Nonfinancial Corporations

Third-quarter 1994 measures of productivity and costs also were announced today for nonfinancial corporations (tables B and 6). Output per all-employee hour rose at a 1.9 percent annual rate, compared with a 1.4 percent decrease during the second quarter. Output increased 4.2 percent in the third quarter of 1994, while hours of all employees increased 2.3 percent, at annual rates. The sector includes all corporations doing business in the United States, except banks, stock and commodity brokers, and finance and insurance agencies.

Hourly compensation increased 3.1 percent in the third quarter; it had decreased 0.1 percent in the second quarter. When the rise in the CPI-U is taken into account, real hourly compensation declined 0.4 percent in the third quarter and 2.7 percent in the second.

Unit labor costs for nonfinancial corporations increased 1.2 percent in the third quarter, about the same as the 1.4 percent increase in the previous quarter. Unit nonlabor costs rose 3.0 percent, and unit profits 1.3 percent. Unit profits had increased strongly during the second quarter, 20.7 percent. The implicit price deflator for the output of nonfinancial corporations rose 1.6 percent in the third quarter, about the same as the 1.8 percent increase one quarter earlier.

Revised Measures

Current and previous measures for the third quarter of 1994 for the business, nonfarm business, and manufacturing sectors are compared in table C. The quarterly movements differ from those reported on November 9 based on information then available.

Productivity and related measures for manufacturing industries include new output estimates from the Bureau of Economic Analysis for 1992 and revised estimates for 1991. This new information places these manufacturing productivity measures on the same basis as the business and nonfarm business sectors which were revised in the August 9 issue of Productivity and Costs. The manufacturing output measures also reflect Indexes of Production from the Board of Governors of the Federal Reserve System which were revised back to January 1991 to incorporate 1992 value-added proportions, revisions to monthly source data, and new seasonal factors. The 1989-91 productivity and cost data for the manufacturing sectors can be found in appendix tables 1-3.