1999 Second 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.

Second Quarter 1999

The Bureau of Labor Statistics of the U.S. Department of Labor reported preliminary productivity data--as measured by output per hour of all persons-- for the second quarter of 1999. The preliminary seasonally adjusted annual rates of productivity change in the second quarter were:

1.6 percent in the business sector and 1.3 percent in the nonfarm business sector.

In both the business and nonfarm business sectors, productivity grew less in the second quarter than in the first quarter, when output per hour of all persons (as revised) rose 3.9 percent in the business sector and 3.6 percent in the nonfarm business sector.

In manufacturing, productivity changes in the second quarter were:

4.9 percent in manufacturing, 9.0 percent in durable goods manufacturing, and -0.3 percent in nondurable goods manufacturing.

Productivity rose 4.9 percent in the manufacturing sector in the second quarter as output increased 4.2 percent and hours of all persons fell 0.7 percent. In the first quarter, manufacturing productivity rose 6.3 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. Second- quarter measures are summarized in table A and appear in detail in tables 1 through 5.

Effective with the release of third-quarter data in November 1999, the Productivity and Costs news release will be issued at 8:30 a.m. E.T. rather than at 10:00 a.m.

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 first to the second quarter of 1999, business sector productivity increased at a 1.6 percent annual rate, as output rose 2.5 percent and hours of all persons engaged in the sector increased 0.9 percent. As revised, labor productivity rose 3.9 percent in the first quarter as output and hours increased 4.9 and 0.9 percent, respectively (table 1).

Hourly compensation increased 5.4 percent in the second quarter and 5.1 percent in the first quarter of 1999. 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 3.8-percent annual rate during the second quarter, up from a 1.1-percent rise in the first quarter of 1999.

Real hourly compensation, which takes into account changes in the Consumer Price Index for All Urban Consumers (CPI-U), increased at a 1.8 percent annual rate during the second quarter of 1999 after rising 3.6 percent in the previous quarter.

The implicit price deflator for the business sector, which reflects changes in unit labor costs and unit nonlabor payments, increased 1.3 percent in the second quarter and 1.0 percent in the first quarter of 1999.

Nonfarm business

Productivity increased 1.3 percent in the nonfarm business sector during the second quarter of 1999, after rising 3.6 percent in the first quarter (table 2). Output rose 2.4 percent in the second quarter, after increasing 5.0 percent during the first quarter of 1999. Hours of all persons working in the sector increased 1.1 percent in the second quarter. This was the smallest increase in hours since the first quarter of 1996 (when they were unchanged) and followed a 1.3 percent rise in the first quarter of 1999.

Hourly compensation increased 5.1 percent in the second quarter, after posting a 4.4 percent rise in the first quarter of 1999. When the rise in the CPI-U is taken into account, real hourly compensation for the second quarter of 1999 rose 1.5 percent.

Unit labor costs grew 3.8 percent in the second quarter and 0.8 percent one quarter earlier. The implicit price deflator for nonfarm business output grew 1.6 percent in the second quarter and 1.3 percent in the first quarter of 1999.

Manufacturing

Productivity increased 4.9 percent in manufacturing, as output rose 4.2 percent and hours of all persons decreased 0.7 percent (seasonally adjusted annual rates). Growth in productivity, output, and hours was quite different in the durable and nondurable goods subsectors. In durable goods, productivity rose 9.0 percent, reflecting output growth of 7.7 percent and a drop of 1.2 percent in hours of all persons. In nondurable goods, productivity fell 0.3 percent in the second quarter, as output declined by 0.2 percent and hours increased 0.1 percent (tables 4 and 5). In the first quarter, total manufacturing productivity rose 6.3 percent, as output increased 1.6 percent and hours declined 4.5 percent (table 3). Labor productivity in manufacturing has risen in every quarter since the third quarter of 1993, when it fell 1.2 percent.

Hourly compensation of all manufacturing workers increased 6.0 percent during the second quarter. The trends in the two subsectors were similar; hourly compensation rose 6.2 percent in durable goods and 5.8 percent in nondurable goods. When the increase in consumer prices is taken into account, the real hourly compensation of all manufacturing workers rose 2.4 percent in the second quarter.

Unit labor costs in manufacturing rose at a 1.1-percent annual rate in the second quarter. The trends in unit labor costs in the two subsectors were quite different, reflecting the very different growth rates in productivity. Unit labor costs fell 2.6 percent in durable goods manufacturing and rose 6.1 percent in nondurable goods manufacturing. The increase in nondurable goods manufacturing unit labor costs in the second quarter was the largest to occur since a 6.2-percent rise was posted in the second quarter of 1993.

Revised Measures

Current and previous measures for the first quarter of 1999 for the business, nonfarm business, and manufacturing sectors are compared in table B. In the business and nonfarm business sectors, both the output and hours measures grew more than reported on June 8, based on information then available. The revisions to output and hours were similar and resulted in minor changes to the productivity and unit labor cost measures. Productivity and related measures were little changed in the manufacturing sector.

All labor input measures have been revised to reflect the annual benchmarking process of employment levels derived from the monthly Current Employment Statistics (CES) survey that occurred on June 4. Updated seasonal adjustment factors also have been incorporated into the labor input measures. These revisions extend back to the first quarter of 1994. Appendix tables 1-6 present quarterly and annual measures for 1994-96.

Revised measures: Nonfinancial Corporations

First-quarter productivity and cost measures for nonfinancial corporations also were revised to incorporate the more recent information on output, compensation, profits, and labor inputs. Productivity growth was revised up, as output grew faster than reported on June 8 while employee hours remained relatively unchanged. Unit labor costs were revised down and now show a decline of 0.1 percent. Unit profits grew at an annual rate of 13.4 percent, compared with the preliminary estimate of 7.7 percent(table C).