1996 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 1996

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 first quarter of 1996. The revised seasonally-adjusted annual rates of productivity change in the first quarter were:

2.3 percent in the business sector, and 2.1 percent in the nonfarm business sector.

In both sectors, the first-quarter productivity gains were the largest since the fourth quarter of 1993.

In manufacturing, productivity changes in the first quarter were:

5.5 percent in manufacturing, 8.1 percent in durable goods manufacturing, and 2.4 percent in nondurable goods manufacturing.

Manufacturing productivity growth in the first quarter was higher than in the fourth quarter of 1995, reflecting both a larger increase in output and a bigger drop in the hours of all persons in the sector. Output and hours in manufacturing, which includes about 18 percent of U.S. business-sector employment, tend to vary more from quarter to quarter than data for the more aggregate business and nonfarm business sectors. First-quarter measures are summarized in table A and appear in detail in tables 1 through 5.

The data sources and methods used in the preparation of the manufacturing series differ from those used in preparing the business and nonfarm business series and these measures are not directly comparable. 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.

Business

From the fourth quarter of 1995 to the first quarter of 1996, business productivity increased at a 2.3 percent annual rate. Output rose 3.3 percent, and hours of all persons engaged in the sector increased 1.0 percent (seasonally adjusted annual rates). During the fourth quarter of 1995, productivity had dropped 0.3 percent (as revised), and output and hours rose 0.7 and 1.1 percent, respectively (table 1).

Hourly compensation increased 3.1 percent during the first quarter of 1996, similar to the 3.2 percent rise in the fourth quarter of 1995. 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 0.8 percent annual rate during the first quarter. These costs had risen 3.5 percent in the fourth quarter of 1995.

Real hourly compensation, which takes into account changes in the Consumer Price Index for All Urban Consumers (CPI-U), fell at a 0.1 percent annual rate in the first quarter; it had risen 0.8 percent in the fourth quarter of 1995.

The implicit price deflator for business output, which reflects changes in unit labor costs and unit nonlabor payments, increased 1.6 percent in the first quarter, compared with a 0.8 percent increase during the fourth quarter of 1995.

Nonfarm business

Productivity rose 2.1 percent in nonfarm businesses during the first quarter of 1996 as output rose 3.1 percent and hours of all persons increased 1.0 percent. During the fourth quarter of 1995, productivity dropped 0.8 percent in nonfarm businesses, reflecting gains of 0.6 percent in output and 1.5 percent in hours (table 2).

Hourly compensation increased at a 3.3 percent annual rate in the first quarter, compared with a 2.9 percent increase one quarter earlier. When the rise in the CPI-U is taken into account, real hourly compensation rose 0.1 percent, less than the 0.5 percent gain recorded in the fourth quarter of 1995. Unit labor costs rose 1.2 percent, after having increased 3.7 percent the previous quarter.

The implicit price deflator for nonfarm business output rose 1.4 percent in the first quarter, compared with a 0.7 percent rise one quarter earlier.

Manufacturing

Productivity increased 5.5 percent in manufacturing in the first quarter of 1996, as output rose 2.3 percent and hours of all persons dropped 3.0 percent (seasonally adjusted annual rates). Productivity and output showed larger increases in durable goods industries than in nondurables. In the fourth quarter of 1995, productivity in the manufacturing sector rose 3.7 percent as output increased 1.4 percent and hours of all persons fell 2.2 percent. Hours of all persons in the manufacturing sector have now fallen for four straight quarters--this occurred in both the durable and the nondurable subsectors (tables 4 and 5).

Hourly compensation of all manufacturing workers dropped 0.7 percent during the first quarter, compared with an increase of 2.8 percent in the previous quarter. In the first quarter of 1996, real hourly compensation fell 3.9 percent when the increase in consumer prices is taken into account, compared with a 0.4 percent increase in the fourth quarter. The first-quarter movement in hourly compensation was affected by a pension contribution made in 1995 by a large durable goods manufacturer. As a result of this, the first- quarter movements in hourly compensation were very different in the durable and nondurable subsectors. In durable goods manufacturing, hourly compensation fell at a 3.2 percent annual rate, and real hourly compensation fell 6.3 percent. However, in nondurable goods manufacturing, hourly compensation rose 3.3 percent and real hourly compensation was unchanged.

Unit labor costs dropped at a 5.9 percent annual rate in the first quarter of 1996, compared with a decrease of 0.8 percent during the fourth quarter of 1995.

Nonfinancial corporations

Preliminary first-quarter 1996 measures of productivity and costs also were announced today for nonfinancial corporations (tables B and 6). Productivity rose 1.3 percent in the first quarter, output 2.3 percent, and hours 1.0 percent (seasonally adjusted annual rates). In the fourth quarter of 1995, productivity had increased 2.0 percent. Nonfinancial corporations include all corporations doing business in the United States, except banks, stock and commodity brokers, and finance and insurance agencies.

Hourly compensation increased 2.6 percent, but fell 0.7 percent when the rise in the CPI-U is taken into account (table 6).

Unit labor costs for nonfinancial corporations increased 1.3 percent in the first quarter, slightly more than the 0.9 percent increase recorded in the fourth quarter of 1995. Unit nonlabor costs fell 1.5 percent in the first quarter of 1996, and unit profits increased 13.5 percent. During the fourth quarter of 1995, unit nonlabor costs rose 1.5 percent, and unit profits dropped 4.4 percent (annual rates). The implicit price deflator for nonfinancial corporate output rose 1.8 percent in the first quarter and 0.5 percent in the fourth quarter.

REVISED MEASURES

Current and previous measures for the first quarter of 1996 for business, nonfarm business, and manufacturing are compared in table C. Productivity and output increased less rapidly than originally reported on May 16, based on information then available.

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. In addition, labor input series that are computed from household survey data have been revised. These series now reflect 1990 census-based population controls, adjusted for the estimated undercount, and they also include new average weekly hours data that include information on those persons not at work. Finally, they incorporate new seasonal adjustment factors that have been computed for measures that depend on these revised series. See tables 1-6 and appendix tables 1-6 for the revised data.