1999 Third 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.

Third 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 third quarter of 1999. The seasonally adjusted annual rates of productivity growth in the third quarter were:

4.7 percent in the business sector, and 4.9 percent in the nonfarm business sector.

The increase in labor productivity for the business sector was the largest since a similar increase in the second quarter of 1996. In the nonfarm business sector, the third-quarter increase in labor productivity was the largest since a 7.4-percent rise in the fourth quarter of 1992.

In manufacturing, revised productivity increases in the third quarter were: 3.9 percent in manufacturing, 4.5 percent in durable goods manufacturing, and 3.8 percent in nondurable goods manufacturing.

The third-quarter productivity increase in manufacturing occurred as output rose 4.2 percent and hours of all persons working in the sector grew 0.3 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. 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 1999, business sector productivity rose at an annual rate of 4.7 percent as output increased 6.3 percent and hours of all persons engaged in the sector increased 1.6 percent (table 1). Employment in the business sector rose in the third quarter by 2.1 percent, but this increase was partially offset by a 0.5-percent decline in average weekly hours at work.

Hourly compensation increased 4.6 percent during the third quarter of 1999. This measure includes wages and salaries, supplements, employer contributions to employee benefit plans, and taxes. Real hourly compensation, which takes into account changes in consumer prices, rose 1.9 percent in the third quarter of 1999.

Unit labor costs declined slightly in the third quarter, -0.1 percent. Unit labor costs had increased 4.2 percent in the second quarter of 1999. The implicit price deflator for the business sector, which reflects changes both in unit labor costs and in unit nonlabor payments, increased at a 0.7 percent annual rate in the third quarter of 1999, after rising 1.1 percent in the previous quarter.

Nonfarm business

Output per hour of all persons in the nonfarm business sector increased 4.9 percent during the third quarter of 1999. This was the largest productivity gain since the fourth quarter of 1992, when it grew at a 7.4 percent annual rate. Output increased 6.6 percent in the third quarter of 1999 and hours of all persons rose 1.6 percent (table 2). As in the larger business sector, an employment increase, 2.2 percent, was mitigated by a decline in average weekly hours at work of 0.6 percent.

Hourly compensation increased at a 4.7 percent annual rate in the third quarter of 1999, similar to a 4.8 percent increase one quarter earlier. When the rise in consumer prices is taken into account, real hourly compensation rose at a 2.1 percent annual rate in the third quarter.

Unit labor costs fell 0.2 percent in the third quarter of 1999. Labor costs account for approximately 63 percent of all nonfarm business payments. The implicit price deflator for nonfarm business rose 0.7 percent, reflecting the decline in unit labor costs and a 2.3-percent increase in unit nonlabor payments. In the second quarter, the implicit price deflator rose 1.4 percent, reflecting a 4.2-percent increase in unit labor costs and a 3.1 percent decline in unit nonlabor payments.

Manufacturing

Productivity increased 3.9 percent in manufacturing in the third quarter of 1999, as output rose 4.2 percent and hours of all persons grew 0.3 percent (seasonally adjusted annual rates). In durable goods industries, productivity grew 4.5 percent in the third quarter as output and hours rose 8.4 and 3.8 percent, respectively. In the nondurable goods industries, third- quarter productivity grew 3.8 percent as output dropped 1.2 percent and hours fell further, -4.8 percent (tables 3, 4, and 5).

Hourly compensation of all manufacturing workers rose 6.3 percent during the third quarter of 1999 (seasonally adjusted annual rates). In durable goods manufacturing, hourly compensation rose 5.9 percent during the third quarter. The increase in nondurable goods manufacturing was higher, 6.3 percent. When the increase in consumer prices is taken into account, real hourly compensation for all manufacturing workers rose 3.6 percent in the third quarter.

Unit labor costs in manufacturing rose 2.3 percent in the third quarter of 1999. Unit labor costs rose 1.4 percent in durable goods manufacturing, following five consecutive quarters of declines in this measure. In nondurable goods manufacturing, unit labor costs in the third quarter rose 2.4 percent.

Nonfinancial Corporations

Third-quarter 1999 measures of productivity and costs also were announced for nonfinancial corporations (tables B and 6). Output per all-employee hour grew at a 4.7 percent annual rate, compared with a 3.2 percent increase in the previous quarter. Output increased 7.1 percent in the third quarter of 1999, and hours of all employees increased 2.3 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 4.6 percent in the third quarter; it rose 4.8 percent in the second quarter. When the rise in consumer prices is taken into account, real hourly compensation increased 2.0 percent in the third quarter and 1.3 percent in the second.

Unit labor costs for nonfinancial corporations declined 0.1 percent in the third quarter, the first decline since the third quarter of 1997 when they fell 1.5 percent. Unit nonlabor costs increased 3.0 percent in the third quarter and 1.8 percent in the second quarter. Unit profits declined at an 8.0 percent annual rate. The implicit price deflator for the output of nonfinancial corporations declined 0.3 percent in the third quarter of 1999. In the previous quarter, the implicit price deflator rose 1.1 percent.

Revised Measures

Current and previous measures for the third quarter of 1999 for the business, nonfarm business, and manufacturing sectors are compared in table C. In the business and nonfarm business sectors, increases in productivity and output are larger than those reported on Nov. 12, based on the information available at that time. Unit labor cost measures for these sectors are correspondingly lower.

In manufacturing, rates of growth in productivity were revised upward in the third quarter due to revisions in the output measures. Unit labor costs were revised downward by similar amounts (tables 3-5 and appendix tables 1- 3). The quarterly measures of productivity, output, and unit labor costs for manufacturing were revised back to 1992 due to the incorporation of revised indexes of industrial production. Annual measures for 1997 and 1998 also were affected. These indexes, published by the Board of Governors of the Federal Reserve System, were changed to incorporate additional and revised source data and updated information on seasonal trends. (See Federal Reserve Statistical Release G.17, "Industrial production and capacity utilization: a revision," Nov. 30, 1999.)