1999 Fourth-Quarter and Annual Averages (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.

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 1999. In the fourth quarter, productivity advanced 4.8 percent in the business sector as output grew 6.7 percent and hours worked rose 1.9 percent (seasonally adjusted annual rates). In the nonfarm business sector, productivity rose 5.0 percent as output increased 6.6 percent and hours grew 1.5 percent.

For the year 1999, the increases in productivity in business and nonfarm business, 3.0 and 2.9 percent, respectively, were slightly higher than the increases reported in the previous year. 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 10.7 percent annual rate in the fourth quarter, reflecting a 7.3-percent rise in output and a drop of 3.0 percent in hours of all persons working in the sector. On an annual basis, manufacturing productivity increased 6.4 percent in 1999--the largest increase since a 6.9-percent rise in 1971. (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, 1999

Business

Productivity in the business sector grew 4.8 percent in the fourth quarter of 1999, reflecting an increase of 6.7 percent in output combined with a 1.9 percent rise in the hours of all persons engaged in the sector. In the third quarter of 1999, productivity rose 4.7 percent (as revised) as output grew 6.5 percent and hours rose 1.7 percent (seasonally adjusted annual rates).

Hourly compensation increased at a 3.6 percent annual rate in the fourth quarter of 1999, following an increase of 4.5 percent in the previous 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, decreased at a 1.2 percent annual rate during the fourth quarter. This was the largest drop in this measure since the first quarter of 1996, when unit labor costs fell 1.6 percent. During the third quarter of 1999, unit labor costs declined 0.2 percent.

Real hourly compensation, which takes into account changes in consumer prices, rose at a 0.6 percent annual rate for persons in the business sector. This measure rose 1.9 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 1.8 percent in the fourth quarter of 1999. This measure increased 0.6 percent in the third quarter.

Nonfarm business

In the nonfarm business sector, productivity increased 5.0 percent in both the third and fourth quarters of 1999 (seasonally adjusted annual rates). These productivity gains were the largest in the nonfarm business sector since the fourth quarter of 1992, when output per hour increased 7.4 percent. In the fourth quarter of 1999, output rose 6.6 percent and hours of all persons--employees, proprietors, and unpaid family workers--rose 1.5 percent. These changes also were similar to those reported in the third quarter of 1999, when output and hours increased 6.8 percent and 1.7 percent, respectively (table 2).

Hourly compensation in the nonfarm business sector rose 4.0 percent in the fourth quarter, and real hourly compensation increased 1.1 percent when the increase in consumer prices was taken into account. During the third quarter, hourly compensation had increased by 4.7 percent, and real hourly compensation had risen 2.0 percent.

Unit labor costs fell 1.0 percent in the fourth quarter, after declining 0.3 percent in the third quarter. The implicit price deflator for nonfarm business output rose 2.1 percent in the fourth quarter of 1999, reflecting both the drop in unit labor costs and a large increase in unit nonlabor payments (7.5 percent).

Manufacturing

Manufacturing productivity grew at a 10.7 percent seasonally adjusted annual rate in the fourth quarter of 1999 as output rose 7.3 percent and hours fell 3.0 percent (table 3). Productivity also rose 10.7 percent in durable goods manufacturing, where output rose 6.9 percent and hours dropped 3.4 percent (table 4). Among nondurable goods manufacturers, productivity rose 10.5 percent in the fourth quarter as output grew 7.8 percent and hours declined 2.4 percent (table 5). In the third quarter, total manufacturing productivity increased 4.4 percent (as revised), reflecting a 4.6-percent rise in output and a 0.2 percent growth in hours of all persons.

The average hourly compensation of manufacturing workers increased 4.3 percent in the fourth quarter. This increase reflected a rise of 4.8 percent in durable goods manufacturing and 3.6 percent in nondurable goods manufacturing When the increase in consumer prices was taken into account, real hourly compensation in total manufacturing 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 5.8 percent. This was the sharpest one-quarter decline in the measure since a 6.9-percent drop in the second quarter of 1961. Unit labor costs in the fourth quarter of 1999 fell 5.3 percent in durable goods manufacturing and 6.2 percent in nondurable goods manufacturing.

AVERAGE ANNUAL CHANGES, 1998-1999

Business

Business sector productivity increased 3.0 percent when the annual average for 1999 is compared with the annual average for 1998 (table B). This was the largest annual productivity increase since 1992, when output per hour grew 4.3 percent. Output rose 4.6 percent in 1999, and hours of all persons engaged in the sector grew 1.5 percent. The 1999 productivity increase was only slightly larger than the 2.8-percent rise posted in 1998, when output increased 5.1 percent and hours rose 2.2 percent.

Hourly compensation in the business sector rose 5.0 percent in 1999, about the same as the 5.3 percent rise in 1998. Real hourly compensation grew 2.9 percent in 1999, following an increase of 3.9 percent in 1998. Unit labor costs rose 1.9 percent in 1999, compared with a 2.4 percent increase in the previous year. The implicit price deflator rose 0.9 percent in 1999 and 0.7 percent in 1998.

Nonfarm business

Productivity increased 2.9 percent in the nonfarm business sector during 1999, about the same as the 2.8 percent rise in 1998. During 1999, output rose 4.7 percent, and hours of all persons increased 1.7 percent. The increase in labor productivity in 1998 resulted from faster growth in both output and hours, 5.2 and 2.4 percent, respectively.

In 1999, hourly compensation rose 4.8 percent, compared with a 5.2 percent increase in 1998. Real hourly compensation increased 2.6 percent in 1999. Unit labor costs in the nonfarm business sector grew 1.8 percent in 1999, slightly less than the 2.4-percent increase in 1998. The implicit price deflator for nonfarm business rose 0.9 percent in 1999, similar to the 0.8 percent rise one year earlier.

Manufacturing

Manufacturing productivity grew 6.4 percent in 1999 as output rose 4.2 percent and hours of all persons fell 2.1 percent (table B). In durable goods manufacturing, productivity increased 9.6 percent in 1999, reflecting an output increase of 7.3 percent and a drop in hours of all persons of 2.1 percent. A much smaller increase in labor productivity in nondurable goods manufacturing in 1999, 2.5 percent, was the result of a 0.3 percent rise in output coupled with a 2.1-percent decline in hours of all persons.

Hourly compensation of manufacturing workers increased 5.0 percent in 1999, down somewhat from the 5.3-percent increase in 1998. Taking into account the rise in consumer prices, real hourly compensation in manufacturing rose 2.8 percent in 1999. This increase was smaller than the 3.9-percent growth recorded in the previous year.

Unit labor costs in manufacturing fell 1.4 percent in 1999; these costs have now dropped in six of the past eight years. Unit labor costs in durable goods manufacturing fell 4.2 percent in 1999--the eighth consecutive drop in unit labor costs in this sector. In contrast, unit labor costs in nondurable goods rose 2.3 percent in 1999. This increase was smaller than the 3.8- percent rise recorded in the previous year.

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. Results for the business and nonfarm business sectors are similar to those published on Dec. 7, based on the information then available. In the manufacturing sector, productivity and output growth is higher, and hourly compensation and unit labor costs lower, than the figures published on Dec. 7.

Revised measures: Nonfinancial Corporations

Revised productivity and output for the third quarter for nonfinancial corporations were lower than those reported on Dec. 7 (table D). Unit labor costs grew at an annual rate of 0.4 percent in the third quarter, compared with the 0.1 percent decline reported on Dec. 7. Small upward revisions to the output measures for the first and second quarters of 1999 also were incorporated.