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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 fourth quarter and for the full year 1998. In the fourth quarter, productivity advanced 3.9 percent in the business sector as output grew 6.6 percent and hours worked rose less--2.6 percent (seasonally adjusted annual rates). In the nonfarm business sector, productivity rose 3.7 percent as output increased 6.8 percent and hours grew 3.0 percent.
For the year 1998, the increases in productivity were higher than those posted in 1997 (as revised) in both the business and nonfarm business sectors. Fourth-quarter productivity and related measures are summarized in table A and annual data in table B. Detailed information is presented in tables 1 through 5.
In the manufacturing sector, increases in productivity were:
Manufacturing productivity grew at a 5.6 percent annual rate in the fourth quarter, reflecting an 8.4-percent increase in durable goods manufacturing and a 2.2-percent increase in nondurable goods. On an annual basis, manufacturing productivity increased 4.3 percent in 1998--the third consecutive increase of more than four percent. (Output and hours in manufacturing, which includes about 17 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.
THIRD-TO-FOURTH QUARTER CHANGES, 1998
Business
Productivity in the business sector grew 3.9 percent in the fourth quarter of 1998, reflecting an increase of 6.6 percent in output combined with a 2.6 percent rise in the hours of all persons engaged in the sector. In the third quarter of 1998, productivity rose 2.6 percent (as revised) as output grew 4.0 percent and hours 1.4 percent (seasonally adjusted annual rates).
Hourly compensation increased at a 3.9 percent annual rate in the fourth quarter of 1998, similar to the 3.7 percent growth during the third 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 just a 0.1 percent annual rate during the fourth quarter. During the third quarter of 1998, unit labor costs rose 1.0 percent.
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 for persons in the business sector. This measure rose 1.8 percent during the third quarter.
The implicit price deflator for business output, which reflects changes in both unit labor costs and unit nonlabor payments, increased at an annual rate of 0.3 percent in the fourth quarter of 1998. This measure increased 0.5 percent in the third quarter.
Nonfarm business
In the nonfarm business sector, productivity increased 3.7 percent in the fourth quarter as output rose 6.8 percent and hours of all persons-- employees, proprietors, and unpaid family workers--rose 3.0 percent (seasonally adjusted annual rates). As in the larger business sector, productivity grew faster in the fourth quarter than it had in the previous quarter. During the third quarter of 1998, nonfarm productivity rose 2.5 percent as output and hours increased 4.0 and 1.4 percent, respectively (table 2).
Hourly compensation in the nonfarm business sector rose 3.5 percent in the fourth quarter, and real hourly compensation increased 1.5 percent when the increase in the CPI-U was taken into account. During the third quarter, hourly compensation had increased by 3.9 percent, and real hourly compensation had risen 2.1 percent.
Unit labor costs fell 0.2 percent in the fourth quarter, after rising 1.4 percent in the previous quarter. The implicit price deflator for nonfarm business output rose 0.3 percent in the fourth quarter of 1998, reflecting both the drop in unit labor costs and an increase in unit nonlabor payments.
Manufacturing
Manufacturing productivity grew at a 5.6 percent seasonally adjusted annual rate in the fourth quarter of 1998 as output rose 5.1 percent and hours fell 0.5 percent (table 3). A large productivity increase occurred in durable goods manufacturing, where productivity and output both rose 8.4 percent and hours were unchanged (table 4). Among nondurable goods manufacturers, productivity rose 2.2 percent in the fourth quarter as output increased 0.9 percent while hours dropped 1.2 percent (table 5). In the third quarter, total manufacturing productivity had risen 4.7 percent (as revised), reflecting a 0.4-percent rise in output and a 4.1 percent fall in hours of all persons working in the sector.
The average hourly compensation of manufacturing workers increased 3.2 percent in both the third and fourth quarters. When the increase in consumer prices was taken into account, real hourly compensation in both quarters rose 1.3 percent.
Since the fourth-quarter increase in manufacturing productivity outpaced the increase in hourly compensation, unit labor costs for the manufacturing sector fell 2.2 percent. Unit labor costs in manufacturing also had fallen in the previous quarter, 1.5 percent. Unit labor costs in the fourth quarter of 1998 fell 4.8 percent in durable goods manufacturing but rose 0.9 percent in nondurable goods manufacturing. Unit labor costs in durable goods manufacturing have risen in only 2 of the last 21 quarters (the fourth quarter of 1997, by 2.2 percent, and the first quarter of 1998, by 0.6 percent).
ANNUAL AVERAGE CHANGES, 1997-1998
Business
Business sector productivity increased 2.3 percent when the annual average for 1998 is compared with the annual average for 1997 (table B). Output rose 4.6 percent in 1998, and hours of all persons engaged in the sector grew 2.2 percent. The 1998 productivity increase was larger than the 1.5-percent rise posted in 1997 (as revised). Output increased 4.6 percent in both years, but business sector hours increased less in 1998 than in 1997, when hours rose 3.1 percent.
Hourly compensation in the business sector rose 4.3 percent in 1998, and real hourly compensation grew 2.7 percent. The increase in real hourly compensation was the largest since 1986, when it grew 3.3 percent. Unit labor costs rose 2.0 percent in 1998, about the same as the 2.1 percent increase in the previous year. The implicit price deflator rose 0.6 percent in 1998.
Nonfarm business
Productivity increased 2.2 percent in the nonfarm business sector during 1998 as output rose 4.6 percent and hours of all persons increased 2.4 percent. The increase in labor productivity in 1997, 1.2 percent, occurred as output and hours rose 4.5 and 3.2 percent, respectively.
In 1998, hourly compensation rose 4.2 percent, compared with a 3.5 percent increase in 1997. Real hourly compensation increased 2.6 percent in 1998. Unit labor costs in the nonfarm business sector grew 2.0 percent in 1998, slightly less than the 2.3-percent increase in 1997. The implicit price deflator for nonfarm business rose 0.7 percent.
Manufacturing
Manufacturing productivity grew 4.3 percent in 1998 as output rose 4.2 percent and hours of all persons fell slightly, 0.1 percent (table B). In durable goods manufacturing, productivity increased 6.8 percent in 1998, reflecting an output increase of 7.0 percent and an increase in hours of all persons of 0.2 percent. The 6.8-percent increase in labor productivity in durable goods was the largest recorded since 1971, when productivity rose 8.6 percent. A smaller increase in labor productivity in nondurable goods manufacturing in 1998, 1.2 percent, was the result of a 0.7 percent rise in output coupled with a drop, 0.5 percent, in hours of all persons.
Hourly compensation of manufacturing workers increased 4.5 percent in 1998, the largest increase since the 5.3-percent rise in 1991. Taking into account the rise in the CPI-U, real hourly compensation in manufacturing rose 2.9 percent in 1998. This increase was the largest since 1982, when real hourly compensation rose 3.3 percent. Average hourly compensation in nondurable goods manufacturing rose 5.1 percent in 1998, more than the 4.1 percent rise in durable goods manufacturing.
Unit labor costs in manufacturing rose 0.2 percent in 1998. This was the first annual increase in unit labor costs since 1993, when they rose 0.7 percent. Unit labor costs in durable goods manufacturing fell 2.5 percent in 1998. This marks the seventh consecutive drop in unit labor costs in this sector. In contrast, unit labor costs in nondurable goods have increased every year since 1992, when they fell 0.2 percent. In 1998, these costs rose 3.8 percent.
Revised Measures
Current and previous measures for the third quarter of 1998 for the business, nonfarm business, and manufacturing sectors are compared in table C. Productivity growth is lower, and unit labor costs correspondingly higher, than the figures published on Dec. 3, based on the information then available. For all three sectors, output trends were revised downward and hours trends were revised upward.
Productivity and cost measures were revised to reflect the results of the 1997 Hours at Work Survey, which are now available. This survey is used to adjust the number of hours for which private nonfarm employees are paid (as reported in the BLS Current Establishment Survey) to hours at the workplace. For 1997, these new results show that hours of all persons increased more than had originally been reported. In the nonfarm business sector, hours of all persons grew 3.2 percent in 1997 rather than 3.0 percent, as previously reported. All of the increase in the ratio of hours at work to hours paid occurred outside of the manufacturing sector, where hours of all persons rose 1.6 percent in the calendar year. This is down slightly from the 1.7-percent rise previously reported.
In manufacturing, rates of growth in productivity for 1994-96 were revised downward due to revisions in the output measures. Unit labor costs have been revised upward by comparable amounts. (See appendix tables 1-3.) Measures of productivity, output, and unit labor costs for manufacturing were revised back to 1988 to incorporate data from the 1992 input-output table released by the Bureau of Economic Analysis, U.S. Department of Commerce. There also are small revisions to the manufacturing data for years prior to 1988. Data for all years now reflect more detailed benchmark input-output tables developed by the Office of Employment Projections of the BLS.
Revised measures: Nonfinancial Corporations
Revised productivity and cost measures for the third quarter for nonfinancial corporations also were announced today. Productivity growth was revised down as employee hours grew faster and output grew more slowly than originally reported on Dec. 3 (table D).
Source: U.S. Bureau of Labor Statistics · Original release Feb 9, 1999.
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