1998 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 1998

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 1998. The seasonally-adjusted annual rates of productivity change in the first quarter were:

0.8 percent in the business sector and 0.2 percent in the nonfarm business sector.

These small productivity gains resulted from strong growth in both output and hours of all persons. Output grew at a 5.3 percent annual rate in both sectors. Hours at work increased 4.4 percent in the business sector and 5.0 percent in the nonfarm business sector. First-quarter measures are summarized in table A and appear in detail in tables 1 through 5.

In manufacturing, productivity changes in the first quarter were:

0.5 percent in manufacturing, 0.4 percent in durable goods manufacturing, and 0.6 percent in nondurable goods manufacturing.

Productivity growth in manufacturing in the first quarter of 1998 reflected a slower rate of increase in both output (1.8 percent) and hours of all persons (1.3 percent), at seasonally-adjusted annual rates, than in the fourth quarter of 1997. 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

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 fourth quarter of 1997 to the first quarter of 1998, business sector productivity increased at a 0.8 percent annual rate. Output and hours advanced 5.3 percent and 4.4 percent, respectively. During the fourth quarter of 1997, output had increased 4.8 percent, and hours of all persons engaged in the sector increased 3.2 percent (seasonally-adjusted annual rates); productivity rose 1.6 percent (table 1).

Hourly compensation increased 4.2 percent during the first quarter of 1998. 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 3.4 percent rate during the first quarter. This increase in unit labor costs was less than the 3.9 percent rise in the fourth quarter.

Real hourly compensation, which takes into account changes in the Consumer Price Index for All Urban Consumers (CPI-U), rose at a 3.7 percent annual rate in the first quarter. The first-quarter increase in real hourly compensation was the largest recorded since a 5.0 percent rise 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, rose just 0.3 percent in the first quarter. In the fourth quarter of 1997, the price of business output increased at an annual rate of 0.9 percent.

Nonfarm business

Productivity edged up 0.2 percent in the nonfarm business sector in the first quarter, as output increased 5.3 percent and hours of all persons went up 5.0 percent. During the fourth quarter of 1997, productivity had risen 1.4 percent in this sector, reflecting gains of 4.9 percent in output and 3.5 percent in hours (table 2). The first-quarter increase in productivity was the smallest since the third quarter of 1996, when output per hour declined 0.7 percent.

Hourly compensation increased at a 4.1 percent annual rate in the first quarter. When the rise in the CPI-U was taken into account, real hourly compensation rose 3.5 percent in the first quarter of 1998; it had increased 3.1 percent in the fourth quarter of 1997. Increases in both quarters were larger than at any time since the first quarter of 1992, when real hourly compensation rose 4.8 percent.

Unit labor costs rose 3.8 percent in the first quarter, the same as in the previous quarter. The implicit price deflator for nonfarm business output rose 0.7 percent in the first quarter, compared with a 1.0 percent rise one quarter earlier.

Manufacturing

Productivity increased at a 0.5 percent seasonally-adjusted annual rate in manufacturing in the first quarter of 1998, as output rose 1.8 percent and hours of all persons increased 1.3 percent. This was the slowest growth in manufacturing output per hour since it fell during the second and third quarters of 1993. In contrast, productivity increased at a rate of 4.3 percent in the fourth quarter of 1997, output grew 8.2 percent, and hours grew 3.8 percent (table 3). The durable and nondurable subsectors of manufacturing had similar growth rates in productivity in the first quarter, 0.4 and 0.6 percent, respectively. In durable goods manufacturing, output growth slowed to a 2.3 percent annual rate in the first quarter from 10.3 percent one quarter earlier. Hours worked in durable goods industries rose 1.9 percent in the first quarter of 1998. Nondurable goods manufacturing output rose 1.1 percent in the first quarter, and hours edged up 0.4 percent (tables 4 and 5).

Hourly compensation of all manufacturing workers rose 2.8 percent during the first quarter after increasing at a rate of 6.1 percent per year in the fourth quarter of 1997. Real hourly compensation in the manufacturing sector rose 2.3 percent in the first quarter of 1998; it had posted a 4.0 percent gain during the previous quarter.

Unit labor costs in manufacturing grew 2.3 percent in the first quarter of 1998, as unit labor costs of durable goods producers rose 1.3 percent, and those of nondurable goods producers grew at a 3.9 percent annual rate. Unit labor costs in total manufacturing recorded their largest increase since the third quarter of 1993, when they rose 3.6 percent.

Fourth-quarter and annual measures for nonfinancial corporations

Fourth-quarter and annual 1997 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 0.6 percent from the third to the fourth quarter of 1997 as output increased 4.9 percent and employee hours rose 4.3 percent. In the third quarter, productivity had increased 6.3 percent as output jumped 7.8 percent and all-employee hours rose 1.5 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 4.7 percent in the fourth quarter, and real hourly compensation rose 2.6 percent. Unit labor costs increased 4.1 percent in the fourth quarter, the largest increase since the first quarter of 1995 when they rose 5.6 percent. In the third quarter of 1997, unit labor costs had declined 1.9 percent. Total unit costs rose 2.4 during the fourth quarter after having dropped 1.9 percent during the third quarter. In the fourth quarter, unit profits fell 11.0 percent. Unit profits had risen 14.3 percent during the third quarter of 1997. The implicit price deflator for nonfinancial corporate output edged up 0.4 percent in the fourth quarter.

Productivity grew 2.6 percent in nonfinancial corporations in calendar year 1997. In 1996, productivity had grown 3.1 percent. Output grew faster in 1997, 5.7 percent, than it had one year earlier, when it grew 4.5 percent. Hours of employees in nonfinancial corporations grew 2.9 percent during 1997, compared with 1.4 percent one year earlier.

The 1997 increase in hourly compensation was 3.8 percent, about the same as the 3.5 percent increase in 1996. Real hourly compensation rose 1.5 percent in 1997. It had increased 0.6 percent in 1996, after having fallen in the three previous years.

Total unit costs rose 0.4 percent in 1997, reflecting an increase of 1.1 percent in unit labor costs and a 1.7 percent drop in unit nonlabor costs. Unit profits for the year rose 3.5 percent; in 1996, they had posted a 10.0 percent gain.

REVISED MEASURES

Current and previous measures for the fourth quarter of 1997 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 10, based on information then available.

Bureau of Labor Statistics measures of output for the manufacturing sectors have been revised back to 1949. These revisions reflect revised price deflators estimated by the Bureau of Economic Analysis of the U.S. Department of Commerce. The revisions also reflect revised shipments data from the Bureau of the Census of the Commerce Department for the years 1988 to 1992. Appendix tables 1 to 3 show the annual indexes of productivity and costs for the total, durable, and nondurable manufacturing sectors, respectively, for the years 1949-1997. The measures of manufacturing output used in the production of quarterly labor productivity and costs measures presented in this release are consistent with annual manufacturing output data released May 6, 1998, in "Multifactor Productivity Trends, 1995 and 1996" (USDL 98-187).