1999 Second Quarter (Revised) 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 today reported revised productivity data--as measured by output per hour of all persons--for the second quarter of 1999. The seasonally adjusted annual rates of productivity change in the second quarter were:

0.8 percent in the business sector and 0.6 percent in the nonfarm business sector.

In both sectors, changes in productivity were revised down compared with results reported on Aug. 5, reflecting downward revisions in output and upward revisions in hours of all persons. (See table C.)

In manufacturing, the revised productivity changes in the second quarter were: 4.8 percent in manufacturing, 8.2 percent in durable goods manufacturing, and 0.1 percent in nondurable goods manufacturing.

In total manufacturing, the change in productivity was revised downward slightly compared with the preliminary estimate. 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; the differences between these measures and the preliminary second-quarter figures issued on Aug. 5 are shown in table C.

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 rose at a 0.8 percent annual rate, as output increased 1.9 percent and hours of all persons engaged in the sector increased 1.0 percent (table A). In the previous quarter, productivity had increased 3.9 percent, reflecting a larger increase in output, 4.9 percent, and an increase in hours of 0.9 percent (table 1).

The increase of 5.4 percent in hourly compensation in the second quarter of 1999 marked the fourth consecutive quarter that the measure grew more than 4.0 percent (seasonally adjusted annual rates). Hourly compensation includes wages and salaries, supplements, employer contributions to employee benefit plans, and taxes. 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 in the second quarter of 1999 after rising 3.6 percent in the first quarter.

Unit labor costs, which reflect changes in both hourly compensation and productivity, accelerated from a 1.1-percent rise in the first quarter of 1999 to a 4.5-percent growth rate in the second quarter. The second-quarter increase in unit labor costs was the largest since a 6.5-percent jump in the first quarter of 1993. The implicit price deflator for the business sector rose 1.3 percent in the second quarter of 1999 as a 4.4-percent drop in unit nonlabor payments offset part of the rise in unit labor costs.

Nonfarm business

Productivity in the nonfarm business sector increased 0.6 percent during the second quarter of 1999, as output increased 1.8 percent and hours of all persons rose 1.2 percent (table A). The increases in productivity and output were the smallest since the second quarter of 1998, when productivity increased 0.4 percent and output increased 1.7 percent (table 2).

Hourly compensation grew at a 5.1 percent annual rate in the second quarter of 1999, following a 4.4 percent increase in the first quarter. When the rise in the CPI-U is taken into account, real hourly compensation increased 1.5 percent in the second quarter of 1999.

In the second quarter of 1999, unit labor costs increased 4.5 percent, the largest increase since the first quarter of 1994, when they also rose 4.5 percent. Unit nonlabor payments fell 3.5 percent in the second quarter of 1999, and the implicit price deflator for nonfarm business output rose 1.6 percent (seasonally adjusted annual rates).

Manufacturing

In the second quarter of 1999, productivity increased 4.8 percent in manufacturing, as output grew 4.2 percent and hours of all persons fell 0.6 percent (seasonally adjusted annual rates). The second-quarter increase in output per hour was due primarily to an 8.2 percent productivity gain in the durable goods sector, as output per hour increased only 0.1 percent in the nondurable goods sector (tables 3, 4, and 5). In durable goods, output rose 7.0 percent in the second quarter while hours of all persons dropped 1.1 percent. Nondurable goods manufacturing output rose 0.4 percent last quarter and hours increased 0.2 percent.

Hourly compensation of all manufacturing workers increased 6.1 percent during the second quarter of 1999, reflecting a 6.6 percent rise in hourly compensation in durable goods industries and a 5.4 percent increase in the nondurable goods sector. Real hourly compensation in the total manufacturing sector rose 2.5 percent in the second quarter, reflecting increases in durable and nondurable manufacturing of 3.0 and 1.8 percent, respectively.

Unit labor costs in manufacturing rose 1.3 percent in the second quarter of 1999. Trends in the two subsectors differed; unit labor costs in durable goods dropped 1.5 percent and those in nondurable goods rose 5.3 percent.

Nonfinancial corporations

Preliminary second-quarter 1999 measures of productivity and costs also were announced today for nonfinancial corporations (tables B and 6). Productivity increased 2.7 percent during the second quarter, as output rose 3.7 percent and hours increased 1.0 percent (seasonally adjusted annual rates). The increases in output and hours were the smallest since the first quarter of 1996, when output rose 1.4 percent and hours were unchanged. Nonfinancial corporations include 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 rose 5.1 percent in the second quarter, after rising 4.9 percent in the first quarter of 1999. When the rise in the CPI-U is taken into account, real hourly compensation increased 1.5 percent in the second quarter of 1999, down from the 3.4-percent increase one quarter earlier (table 6).

Unit labor costs for nonfinancial corporations increased 2.3 percent in the second quarter of 1999, after declining 0.1 percent in the previous quarter. Unit nonlabor costs rose 1.3 percent in the second quarter, up from the 6.2 percent decline one quarter earlier. Unit profits fell 5.9 percent in the second quarter, after rising 13.4 percent in the first quarter of 1999. The implicit price deflator for nonfinancial corporate output rose 1.0 percent in the second quarter of 1999.

Revised Measures

Current and previous measures for the second quarter of 1999 for the business, nonfarm business, and manufacturing sectors are compared in table C. The quarterly movements differ from those reported on Aug. 5 based on information then available. In the business and nonfarm business sectors, changes in output (which are based on information from the national income and product accounts prepared by the U.S. Department of Commerce) were revised down, leading to smaller increases in productivity and larger increases in unit labor costs than previously reported. Measures for the manufacturing sector reflect only minor revisions.