2000 First 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.

First Quarter 2000

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 first quarter of 2000. The revised seasonally adjusted annual rates of productivity change in the first quarter were:

1.8 percent in the business sector, and 2.4 percent in the nonfarm business sector.

In both sectors, the first-quarter productivity gains were the same as those reported initially on May 4. (These data do not reflect the employment benchmark of the BLS Current Employment Statistics released on June 2.)

In manufacturing, the revised productivity changes in the first quarter were: 7.3 percent in manufacturing, 11.3 percent in durable goods manufacturing, and 1.9 percent in nondurable goods manufacturing.

The increase in manufacturing productivity reflected a 6.8-percent rise in output and a drop of 0.5 percent in hours worked. The first-quarter productivity increase was smaller than the 10.8-percent increase recorded in the fourth quarter of 1999. 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. First-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 fourth quarter of 1999 to the first quarter of 2000, business productivity increased 1.8 percent, reflecting increases of 6.1 percent in output and 4.2 percent in hours of all persons (seasonally adjusted annual rates). The increase in productivity was smaller than the 6.6 percent rise recorded in the previous quarter, when output rose 8.6 percent and hours grew 1.9 percent (table 1).

Hourly compensation increased 3.5 percent during the first quarter of 2000. This measure of compensation includes wages and salaries, supplements, employer contributions to employee benefit plans, and taxes. Real hourly compensation, which takes into account changes in consumer prices, declined 0.3 percent in the first quarter. This was the first decline in real hourly compensation since the first quarter of 1996, when it fell 0.6 percent.

Unit labor costs, which reflect changes in both hourly compensation and productivity, increased 1.7 percent during the first quarter, after declining 3.1 percent during the fourth quarter of 1999. The implicit price deflator for business output, which reflects changes in both unit labor costs and unit nonlabor payments, increased 2.2 percent in the first quarter of 2000. This increase was the largest posted since the first quarter of 1997, when the implicit price deflator rose 2.8 percent.

Nonfarm business

Productivity rose 2.4 percent in nonfarm business during the first quarter of 2000, reflecting an increase of 6.1 percent in output and a 3.6 percent rise in hours of all persons. In the fourth quarter of 1999, nonfarm business productivity rose 6.9 percent, as output increased 8.5 percent and hours grew 1.5 percent (table 2).

The first-quarter increase in hourly compensation, 4.1 percent, was similar to the 3.8 percent rise reported for the fourth quarter. When the rise in consumer prices is taken into account, the 0.2 percent gain in real hourly compensation in the first quarter was the smallest since the first quarter of 1996, when it fell 0.5 percent.

The 1.6-percent increase in unit labor costs in the first quarter followed declines of 2.9 percent in the fourth quarter of 1999 and 0.3 percent in the third quarter. The implicit price deflator for nonfarm business output rose 2.4 percent in the first quarter of 2000.

Manufacturing

Productivity increased 7.3 percent in manufacturing in the first quarter, as output rose 6.8 percent and hours of all persons edged down 0.5 percent (seasonally adjusted annual rates). In durable goods industries, productivity rose sharply, 11.3 percent, during the first quarter. This reflected a large increase in output, 11.1 percent, and a slight decline, 0.1 percent, in hours of all persons. In nondurable goods industries, productivity rose 1.9 percent as output rose 0.9 percent and hours fell 0.9 percent (tables 3, 4, and 5).

Hourly compensation in manufacturing rose 3.6 percent during the first quarter. This increase reflects a rise of 2.9 percent in the hourly compensation of persons in durable goods industries and a larger increase, 4.7 percent, in the hourly compensation of workers in nondurable goods industries. Real hourly compensation, which takes account of changes in consumer prices, dropped 0.3 percent for all manufacturing workers.

The 7.3-percent gain in manufacturing productivity in the first quarter of 2000 was more than enough to offset the 3.6-percent increase in hourly compensation. As a result, unit labor costs fell 3.4 percent during the quarter, after having declined 5.9 percent in the previous quarter. (The fourth-quarter drop in unit labor costs was the largest in manufacturing since a 6.9 percent drop in the second quarter of 1961.) The first-quarter decline in unit labor costs can be attributed to the durable goods sector, where these costs dropped 7.5 percent. In the smaller nondurable goods sector, gains in hourly compensation exceeded those in labor productivity, and unit labor costs rose 2.8 percent.

Nonfinancial corporations

Preliminary first-quarter 2000 measures of productivity and costs for nonfinancial corporations also were announced today (tables B and 6). Productivity grew 3.6 percent in the first quarter, as output increased 7.3 percent and employee-hours grew 3.6 percent (seasonally adjusted annual rates). The growth in employee-hours is the largest since the second quarter of 1997, when they increased 4.0 percent. In the fourth quarter of 1999, productivity had increased 5.1 percent as output and hours grew 7.5 and 2.3 percent, respectively. Nonfinancial corporations include all corporations doing business in the United States, except banks, stock and commodity brokers, and finance and insurance agencies.

Hourly compensation increased 3.5 percent during both the first quarter of 2000 and the fourth quarter of 1999. However, when the rise in consumer prices is taken into account, real hourly compensation fell 0.4 percent in the first quarter after having risen slightly, 0.7 percent, in the previous quarter. Unit labor costs in nonfinancial corporations declined 0.1 percent in the first quarter, less than the 1.5-percent drop one quarter earlier.

Unit profits increased 14.3 percent in the first quarter, the largest increase since the first quarter of 1996, when they increased 21.7 percent. In the fourth quarter of 1999, unit profits had increased 10.7 percent. The implicit price deflator for nonfinancial corporate output rose 1.6 percent in the first quarter of 2000.

REVISED MEASURES

Current and previous measures for the first quarter of 2000 for business, nonfarm business, and manufacturing are compared in table C. In the business and nonfarm business sectors, productivity and cost measures were similar to those reported on May 4, based on information then available. In manufacturing, productivity and output grew more rapidly--and unit labor costs fell further--than originally reported.