1997 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 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 third quarter of 1997. The preliminary seasonally-adjusted annual rates of productivity growth in the third quarter were:

4.4 percent in the business sector, and 4.5 percent in the nonfarm business sector.

In both the business and the nonfarm business sectors, productivity increases in the third quarter were the largest recorded since the fourth quarter of 1992.

In manufacturing, productivity increases in the third quarter were:

9.8 percent in manufacturing, 13.3 percent in durable goods manufacturing, and 5.7 percent in nondurable goods manufacturing.

The 9.8 percent rise in manufacturing productivity was the largest recorded since the second quarter of 1982. 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 indexes of industrial production independently 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 1997, business sector productivity increased at a 4.4 percent annual rate. Output rose 4.2 percent, while hours of all persons engaged in the sector fell 0.2 percent (seasonally adjusted annual rates). After revisions, second-quarter productivity in the business sector rose 2.4 percent, as output increased 3.9 percent, and hours of all persons rose 1.5 percent (tables B and 1).

Hourly compensation increased 4.6 percent during the third quarter of 1997 after rising 3.3 percent 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 0.2 percent annual rate during the third quarter. During the previous quarter, these costs had risen 0.9 percent.

Real hourly compensation, which takes into account changes in the Consumer Price Index for All Urban Consumers (CPI-U), increased 2.5 percent in the third quarter, slightly more than the 2.2-percent increase posted in the previous quarter. Real hourly compensation in the business sector has now risen in three consecutive quarters. The third-quarter increase in real hourly compensation was the largest since a 5.0 percent increase was recorded in the first quarter of 1992.

The implicit price deflator for the business sector, which reflects changes in both unit labor costs and unit nonlabor payments, increased at a 1.0 percent annual rate in the third quarter, down from a 1.5 percent increase during the second quarter of 1997.

Nonfarm business

Productivity rose 4.5 percent in the nonfarm business sector during the third quarter of 1997. The third-quarter increase in labor productivity was the largest in the nonfarm business sector since a 5.9-percent rise was recorded in the fourth quarter of 1992. The increase in labor productivity in the third quarter occurred as output rose 4.3 percent and hours of all persons fell slightly, by 0.1 percent. Employment in the nonfarm business sector rose 1.0 percent during the third quarter but average weekly hours worked dropped 1.1 percent. In the previous quarter, productivity had risen 2.4 percent as output grew 3.8 percent and hours increased 1.4 percent (table 2).

Hourly compensation increased at a 4.2 percent annual rate in the third quarter and 3.3 percent one quarter earlier. When the rise in the CPI-U is taken into account, real hourly compensation rose at a 2.1 percent annual rate during the July-September period. Real hourly compensation had risen 2.2 percent during the second quarter and 2.1 percent in the first quarter of 1997.

Unit labor costs fell 0.3 percent during the third quarter of 1997. This decrease was the first decline in these costs since the second quarter of 1994. In the second quarter of 1997, unit labor costs in the nonfarm business sector rose 0.9 percent. The implicit price deflator for nonfarm business output rose 1.1 percent in the third quarter, a somewhat smaller increase than the 1.4-percent rise posted in the previous quarter.

Manufacturing

Productivity increased 9.8 percent in manufacturing in the third quarter of 1997, as output rose 7.9 percent but hours of all persons fell 1.7 percent (seasonally adjusted annual rates). In the durable goods sector, third- quarter productivity soared to a 13.3-percent annual rate of growth as output increased 12.5 percent and hours fell 0.7 percent. Labor productivity also increased in the nondurable goods sector during the third quarter, 5.7 percent, as output rose 2.5 percent and hours of all persons dropped 3.1 percent. In the second quarter of 1997, manufacturing productivity had risen 2.8 percent (as revised) as output increased 3.9 percent and hours rose 1.1 percent (tables 3, 4, and 5).

Hourly compensation of manufacturing workers increased an average of 3.6 percent during the third quarter after rising 2.6 percent in the previous quarter (seasonally adjusted annual rates). In the third quarter, hourly compensation grew 2.6 percent in durable goods and 5.0 percent in nondurable goods. When the increase in the CPI-U is taken into account, real hourly compensation in total manufacturing rose 1.5 percent in both the second and third quarters.

Unit labor costs fell 5.7 percent in the third quarter of 1997 and 0.2 percent in the second quarter. The drop in unit labor costs during the third quarter in durable goods, 9.4 percent, was considerably larger than the drop in these costs in nondurable goods, 0.7 percent.

Revised Measures

Current and previous measures for the second quarter of 1997 for the business, nonfarm business, and manufacturing sectors are compared in table B. In the business and nonfarm business sectors, the quarterly movements in output per hour and output are slightly lower, and unit labor costs correspondingly higher, than those reported on September 9 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.

Revised measures: Nonfinancial Corporations

Second quarter 1997 productivity and cost measures for nonfinancial corporations also were revised to incorporate more recent information than was available on September 9. Productivity, output, and unit profits were revised downward, while unit labor costs and the implicit price deflator were revised upward (tables C and 6).