1996 Third 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.

Third Quarter 1996

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

0.3 percent in the business sector, and 0.2 percent in the nonfarm business sector.

In both the business and the nonfarm business sectors, productivity increases in the third quarter were smaller than those recorded in the second quarter (as revised).

In manufacturing, productivity increases in the third quarter were:

6.3 percent in manufacturing, 8.2 percent in durable goods manufacturing, and 3.7 percent in nondurable goods manufacturing.

The 6.3 percent rise in manufacturing productivity was the largest recorded since the first quarter of 1994. 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. Third-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 second quarter to the third quarter of 1996, business sector productivity increased at a 0.3 percent annual rate. Output rose 2.4 percent, and hours of all persons engaged in the sector increased 2.0 percent (seasonally adjusted annual rates). After revisions, second-quarter productivity in the business sector rose 1.1 percent, as output increased 5.0 percent, and hours of all persons rose 3.9 percent (tables B and 1).

Hourly compensation increased 4.3 percent during the third quarter of 1996, similar to the 4.1 percent rise in the second quarter. This measure includes wages and salaries, supplements, employer contributions to employee benefit plans, and taxes. Unit labor costs, which reflect changes in both hourly compensation and productivity, increased at a 4.0 percent annual rate during the third quarter. During the previous quarter, these costs had risen 3.0 percent.

Real hourly compensation, which takes into account changes in the Consumer Price Index for All Urban Consumers (CPI-U), increased 2.0 percent in the third quarter and 0.3 percent in the second quarter of 1996. The third-quarter increase in real hourly compensation was the largest since a 5.2 percent increase was recorded in the first quarter of 1992.

The implicit price deflator for the business sector, which reflects changes in unit labor costs and unit nonlabor payments, increased at a 1.2 percent annual rate in the third quarter, down from a 2.4 percent increase during the second quarter of 1996.

Nonfarm business

Productivity rose 0.2 percent in the nonfarm business sector during the third quarter of 1996, slightly less than the 0.5 percent increase recorded in the second quarter of the year. Output grew at a 2.3 percent annual rate in the third quarter, down from the 4.8 percent increase posted in the second quarter. Hours of all persons in the nonfarm business sector rose 2.1 percent in the third quarter of 1996 and 4.3 percent in the previous quarter (table 2).

Hourly compensation increased at a 3.9 percent annual rate in the third quarter, nearly the same as the 3.8 percent increase one quarter earlier. When the rise in the CPI-U is taken into account, real hourly compensation rose at a 1.6 percent annual rate during the July-September period. In the previous quarter, growth in real hourly compensation had been unchanged. Unit labor costs increased 3.7 percent during the third quarter of 1996, somewhat more rapidly than the 3.3 percent annual rate recorded during the second quarter of 1996.

The implicit price deflator for nonfarm business output rose 1.1 percent in the third quarter, compared with a 2.1 percent increase one quarter earlier.

Manufacturing

Productivity increased 6.3 percent in manufacturing in the third quarter of 1996, as output rose 5.4 percent and hours of all persons fell 0.8 percent (seasonally adjusted annual rates). This increase in manufacturing productivity was the largest since a 6.7 percent increase was recorded in the first quarter of 1994. In the durable goods sector, third-quarter productivity rose 8.2 percent as output increased 7.5 percent and hours fell 0.7 percent. Productivity increased 3.7 percent in the nondurable goods sector as output increased 2.7 percent and hours of all persons fell 1.0 percent. In the second quarter of 1996, manufacturing productivity posted a revised 2.9 percent increase as output rose 7.1 percent and hours rose 4.1 percent (tables 3, 4, and 5).

Hourly compensation of manufacturing workers increased an average 4.6 percent during the third quarter, down from the 5.8 percent increase recorded in the second quarter (seasonally adjusted annual rates). The growth in hourly compensation was nearly the same in the durable (4.6 percent) and nondurable (4.7 percent) sectors. Real hourly compensation in total manufacturing rose 2.2 percent in the third quarter when the increase in the CPI-U is taken into account. In the second quarter of 1996, real hourly compensation of manufacturing workers had risen 1.9 percent.

Unit labor costs fell at a 1.6 percent annual rate in the third quarter of 1996. These costs had increased 2.8 percent during the second quarter of 1996. The third-quarter movements in the two subsectors of manufacturing were quite different, reflecting the similar increases in hourly compensation and different productivity movements. Unit labor costs for durable goods manufacturers fell 3.3 percent in the third quarter while those for nondurable goods manufacturers rose 0.9 percent.

Revised Measures

Current and previous measures for the second quarter of 1996 for the business, nonfarm business, and manufacturing sectors are compared in table B. For the business and nonfarm business sectors, the quarterly movements in output per hour and hourly compensation are similar to those reported on September 10 based on information then available. Productivity and output movements in the manufacturing sector were revised upward and unit labor costs revised downward, based on newer information from the Federal Reserve Board's Indexes of Industrial Production. In all sectors, hours of all persons in the first and second quarters were revised due to a correction of the seasonal adjustment factors used with the establishment-based employment data. See USDL 96-414.

Revised measures: Nonfinancial Corporations

Productivity and cost measures for the second quarter for nonfinancial corporations also were revised to incorporate more recent information than was available on September 10. Productivity and output were revised downward, while unit labor costs and unit profits were revised upward (tables C and 6).