1997 First 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.

First Quarter 1997

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 first quarter of 1997. The seasonally-adjusted annual rates of productivity change in the first quarter were:

2.1 percent in the business sector and 2.0 percent in the nonfarm business sector.

In both sectors, first-quarter productivity gains were larger than those posted in the previous three quarters.

In manufacturing, productivity changes in the first quarter were:

3.1 percent in manufacturing, 3.4 percent in durable goods manufacturing, and 3.5 percent in nondurable goods manufacturing.

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 1996 to the first quarter of 1997, business sector productivity increased at a 2.1 percent annual rate. Output and hours advanced 6.8 percent and 4.5 percent, respectively. During the fourth quarter of 1996, output had increased 4.8 percent, and hours of all persons engaged in the sector increased 3.5 percent (seasonally adjusted annual rates); productivity rose 1.2 percent (table 1).

Hourly compensation increased 4.5 percent during the first quarter of 1997 and 3.7 percent in the fourth 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 2.3 percent rate during the first quarter. This increase in unit labor costs was about the same as the 2.4 percent rise in the previous quarter.

Real hourly compensation, which takes into account changes in the Consumer Price Index for All Urban Consumers (CPI-U), rose at a 2.0 percent annual rate in the first quarter, after rising only 0.3 percent in the fourth quarter of 1996. The first-quarter increase in real hourly compensation was the largest recorded since a 5.1 percent increase was posted 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 1.8 percent in the first quarter, somewhat more than the 1.1 percent increase during the fourth quarter of 1996.

Nonfarm business

Productivity rose 2.0 percent in the nonfarm business sector in the first quarter, as output increased 6.8 percent and hours of all persons went up 4.7 percent. During the fourth quarter of 1996, productivity had risen 1.1 percent in this sector, reflecting gains of 4.9 percent in output and 3.8 percent in hours (table 2). The first-quarter increase in productivity was the largest since the 2.8 percent gain in the fourth quarter of 1993.

Hourly compensation increased at a 4.7 percent annual rate in the first quarter, compared with a 3.6 percent increase one quarter earlier. When the rise in the CPI-U was taken into account, real hourly compensation rose 2.3 percent; it had increased 0.2 percent in the fourth quarter.

Unit labor costs rose 2.7 percent in the first quarter. The implicit price deflator for nonfarm business output rose 2.0 percent in the first quarter, compared with a 1.2 percent rise one quarter earlier.

Manufacturing

Productivity increased at a 3.1 percent seasonally-adjusted annual rate in manufacturing in the first quarter of 1997, as output rose 6.7 percent and hours of all persons increased 3.5 percent. In the fourth quarter of 1996, productivity and output rose 4.3 percent, and hours were unchanged (table 3). Although the durable and nondurable subsectors of manufacturing had similar growth in productivity in the first quarter, 3.4 and 3.5 percent, respectively, the underlying trends in output and hours were quite different. In durable goods manufacturing, output growth surged at a 10.3 percent annual rate in the first quarter, and hours of all persons rose 6.6 percent. Nondurable goods manufacturing output grew 2.6 percent in the first quarter, and hours of all persons dropped at a 0.8 percent annual rate (tables 4 and 5).

Hourly compensation of all manufacturing workers rose 4.5 percent during the first quarter after having risen 2.7 percent in the fourth quarter of 1996. Real hourly compensation in the manufacturing sector rose 2.0 percent in the first quarter of 1997; it had dropped 0.6 percent during the previous quarter.

Unit labor costs in manufacturing rose 1.4 percent in the first quarter of 1997 after having fallen 1.5 percent in the fourth quarter of 1996 and 1.2 percent in the third quarter. In the first quarter of 1997, unit labor costs of durable goods producers rose 0.9 percent, and those of nondurable goods producers rose 0.5 percent.

Fourth-quarter and annual measures for nonfinancial corporations

Fourth-quarter and annual 1996 measures of productivity and costs also were announced today for the nonfinancial corporate sector (tables B, C, and 6). Output per all-employee hour rose 1.7 percent from the third to the fourth quarter of 1996 as output increased 5.0 percent and employee hours rose 3.3 percent. In the third quarter, productivity had risen 4.0 percent as output rose 6.1 percent and all-employee hours rose 2.0 percent (seasonally adjusted annual rates). The sector includes all corporations doing business in the United States, except those classified as depository institutions, nondepository institutions, security and commodity brokers, insurance carriers, regulated investment offices, small business investment offices, and real estate investment trusts.

Hourly compensation increased 3.2 percent in the fourth quarter, and real hourly compensation fell 0.1 percent. Unit labor costs rose 1.5 percent in the fourth quarter compared with a 0.1 percent rise one quarter earlier. Total unit costs rose 1.4 during the fourth quarter after having dropped 0.2 percent during the third quarter. In the fourth quarter, unit profits fell 9.4 percent. Unit profits had risen 2.0 percent during the third quarter of 1996. The implicit price deflator for nonfinancial corporate output edged up 0.1 percent during both the third and fourth quarters.

Productivity grew 2.4 percent in nonfinancial corporations in calendar year 1996, the largest increase since a gain of 2.7 percent was posted in 1992. In 1995, productivity had grown 0.4 percent. Output grew faster in 1996, 4.5 percent, than it had one year earlier, when it grew 3.5 percent. Hours of employees in nonfinancial corporations grew 2.1 percent during 1996.

The 1996 increase in hourly compensation was 3.5 percent. Real hourly compensation rose 0.5 percent in 1996, the first annual increase posted since 1992, when it rose 1.7 percent.

Total unit costs rose 0.4 percent in 1996, reflecting an increase of 1.1 percent in unit labor costs and a 1.6 percent drop in unit nonlabor costs. Unit profits for the year rose 6.8 percent; in 1995, they had risen only 0.5 percent.

REVISED MEASURES

Current and previous measures for the fourth quarter of 1996 for the business, nonfarm business, and manufacturing sectors are compared in table D. Some of the quarterly movements differ slightly from those reported on March 11, based on information then available.

Measures of productivity, output, and unit labor costs for the business and nonfarm business sectors and nonfinancial corporations have been revised back to 1959 to reflect the historical revisions of the National Income and Product Accounts (NIPA) announced by the Bureau of Economic Analysis, U.S. Department of Commerce, on April 30. These revisions were small. There were much larger revisions to data on corporate profits for nonfinancial corporations. However, these were largely offset by revisions to nonlabor costs. Appendix table 1 shows the annual indexes of productivity and costs for nonfinancial corporations for the years 1959-1994.