1996 Second Quarter (Preliminary) 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.

Second Quarter 1996

The Bureau of Labor Statistics of the U.S. Department of Labor reported preliminary productivity data--as measured by output per hour of all persons--for the second quarter of 1996. The preliminary seasonally adjusted annual rates of productivity change in the second quarter were:

0.5 percent in the business sector, and -0.1 percent in the nonfarm business sector.

In the business sector, productivity growth in the second quarter was slower than in the first quarter, when it rose 2.0 percent (as revised). In the nonfarm business sector, productivity fell in the second quarter after posting an increase of 1.8 percent one quarter earlier.

In manufacturing, productivity changes in the second quarter were:

1.5 percent in manufacturing, 3.1 percent in durable goods manufacturing, and -0.1 percent in nondurable goods manufacturing.

The second-quarter increase in manufacturing productivity was the smallest since the second quarter of 1993. 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. Second-quarter results 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 (page 5).

Business

From the first to the second quarter of 1996, business sector productivity increased at a 0.5 percent annual rate, as output rose 4.4 percent and hours of all persons engaged in the sector rose 3.9 percent. In the first quarter, productivity had increased 2.0 percent as output increased 3.0 percent and hours rose 1.0 percent (table 1).

Hourly compensation increased 4.1 percent in the second quarter and 3.0 percent in the first quarter of 1996. 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 3.6 percent annual rate during the second quarter, compared with a 1.0 percent rise during the first quarter.

Real hourly compensation, which takes into account changes in the Consumer Price Index for All Urban Consumers (CPI-U), increased at a 0.2 percent annual rate in the second quarter, after falling 0.2 percent one quarter earlier.

The implicit price deflator for the business sector, which reflects changes in unit labor costs and unit nonlabor payments, increased 2.5 percent in the second quarter, compared with a 1.5 percent rise in the first quarter.

Nonfarm business

Productivity fell 0.1 percent in the nonfarm business sector during the second quarter of 1996, compared with a 1.8 percent increase in the first quarter (table 2). Hours of all persons in the nonfarm business sector increased 4.3 percent in the second quarter, slightly more than the 4.2 percent increase in output. In the previous quarter, hours increased 1.0 percent and output rose 2.7 percent. In both the first and second quarters of 1996, employment in nonfarm business rose 2.5 percent. Average weekly hours, on the other hand, fell 1.5 percent in the first quarter but rose 1.7 percent in the second quarter.

Hourly compensation increased at a 3.7 percent annual rate in the second quarter, slightly more than the 3.3 percent increase one quarter earlier. When the rise in the CPI-U is taken into account, real hourly compensation dropped 0.1 percent in the second quarter of 1996 after remaining unchanged in the first quarter. Unit labor costs grew 3.8 percent in the second quarter, compared with the 1.5 percent increase posted in the previous quarter.

The implicit price deflator for nonfarm business output rose 2.2 percent in the second quarter and 1.4 percent in the first quarter of 1996.

Manufacturing

Productivity increased 1.5 percent in manufacturing, as output rose 5.5 percent and hours of all persons rose 3.9 percent (seasonally adjusted annual rates). In the first quarter, productivity increased 5.6 percent, as output rose 2.4 percent and hours declined 3.0 percent (table 3). The hours increase in the second quarter followed four consecutive quarters of decline and was the largest increase since the fourth quarter of 1987, when it increased 5.0 percent. In durable goods, productivity increased 3.1 in the second quarter of 1996, less than the 7.8 percent increase posted in the first quarter. Both output and hours in durable goods manufacturing showed strong gains in the second quarter of 10.0 and 6.6 percent, respectively. Productivity declined 0.1 percent in nondurable goods manufacturing in the second quarter, as output increased 0.1 percent and hours rose 0.2 percent (tables 4 and 5).

Hourly compensation of all manufacturing workers increased 5.8 percent during the second quarter. In the first quarter, hourly compensation in manufacturing had risen 0.4 percent. The first-quarter movement in hourly compensation was affected by a pension contribution made in 1995 by a large durable goods manufacturer. In the second quarter, hourly compensation rose 6.8 percent in durables and 3.8 percent in nondurables. Manufacturing real hourly compensation rose 1.9 percent when the increase in consumer prices is taken into account, compared with a 2.8 percent drop in the previous period.

Unit labor costs rose at a 4.2 percent annual rate in the second quarter after falling 4.9 percent one quarter earlier. The second-quarter increase in unit labor costs in manufacturing was the largest since a 6.0 percent rise in the first quarter of 1991.

Revised Measures

Current and previous measures for the first quarter of 1996 for the business, nonfarm business, and manufacturing sectors are compared in table B. In the business and nonfarm business sectors, increases in productivity and output are somewhat smaller than reported on June 18, based on information then available. In manufacturing, hourly compensation shows a slight increase rather than the decline originally reported. Compensation measures for all sectors and output measures for the business and nonfarm business sectors incorporate the "limited" annual revision of the national income and product accounts produced by the Bureau of Economic Analysis, U.S. Department of Commerce (BEA 96-24). Appendix tables 1-6 contain information for 1993, the earliest year affected.

Revised measures: Nonfinancial Corporations

Productivity and cost measures for the first quarter for nonfinancial corporations, which were revised to incorporate the most recent information, were generally the same as the preliminary results announced on June 18. Unit profits grew at an annual rate of 14.3 percent compared with the preliminary estimate of 13.5 percent (table C).