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

6.5 percent in the business sector and 5.7 percent in the nonfarm business sector.

In both sectors, increases in productivity were larger than reported on Aug. 8, reflecting both upward revisions in output and downward revisions in hours of all persons. (See table C.)

In manufacturing, the revised productivity changes in the second quarter were: 5.4 percent in manufacturing, 10.6 percent in durable goods manufacturing, and -0.8 percent in nondurable goods manufacturing.

In total manufacturing, the change in productivity was revised upward 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. 8 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 2000, business sector productivity rose at a 6.5 percent annual rate, as output increased 5.9 percent and hours of all persons engaged in the sector decreased 0.6 percent (table A). In the previous quarter, productivity had increased 1.6 percent, reflecting a 5.3-percent increase in output and a 3.7-percent increase in hours (table 1).

A rise in hourly compensation of 6.4 percent in the second quarter was the largest increase in that measure since the fourth quarter of 1997, when it rose 6.5 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 consumer prices, increased at a 2.7 percent annual rate in the second quarter of 2000, after falling at a 0.4 percent annual rate in the first quarter.

Changes in unit labor costs reflect changes in both hourly compensation and productivity. Unit labor costs decreased 0.1 percent in the second quarter of 2000, after rising 1.9 percent in the first quarter (seasonally adjusted annual rates). The implicit price deflator for the business sector rose 2.6 percent in the second quarter due to a 7.1-percent rise in unit nonlabor payments, which was more than enough to offset the slight drop in unit labor costs.

Nonfarm business

Productivity in the nonfarm business sector increased 5.7 percent during the second quarter of 2000, as output increased 6.1 percent and hours of all persons rose 0.4 percent (table A). The increase in hours was the smallest since the first quarter of 1996, when hours decreased 0.1 percent. In the first quarter of 2000, nonfarm productivity had increased 1.9 percent, as output and hours grew 5.2 percent and 3.2 percent, respectively (table 2).

Hourly compensation grew at a 5.3 percent annual rate in the second quarter of 2000, following a 3.9 percent increase in the first quarter. When the rise in consumer prices is taken into account, real hourly compensation increased 1.7 percent in the second quarter of 2000.

In the second quarter of 2000, unit labor costs decreased 0.4 percent in the nonfarm business sector. This measure had increased 1.9 percent in the first quarter. Unit nonlabor payments grew 6.6 percent in the second quarter of 2000, and the implicit price deflator for nonfarm business output rose 2.3 percent (seasonally adjusted annual rates).

Manufacturing

In the second quarter of 2000, productivity increased 5.4 percent in manufacturing, as output grew 7.3 percent and hours of all persons rose 1.9 percent (seasonally adjusted annual rates). The second-quarter increase in output per hour was due entirely to a 10.6 percent productivity gain in the durable goods sector, as output per hour dropped 0.8 percent in the nondurable goods sector (tables 3, 4, and 5). In durable goods, output grew 14.4 percent, and hours rose 3.4 percent. In contrast, nondurable goods output and hours both fell--1.3 and 0.5 percent, respectively.

Hourly compensation of all manufacturing workers increased 3.3 percent during the second quarter of 2000, reflecting a 2.9 percent rise in hourly compensation in durable goods industries and a 3.7 percent increase in the nondurable goods sector. Real hourly compensation in the total manufacturing sector fell off slightly, by 0.3 percent in the second quarter, reflecting a decline of 0.7 percent in durable goods and a 0.1-percent rise in nondurable goods. The decline in real hourly compensation in manufacturing was the first in this series since a 0.8-percent drop in the second quarter of 1997.

Unit labor costs in manufacturing dropped 2.0 percent in the second quarter of 2000. Trends in the two subsectors differed; unit labor costs fell 7.0 percent in durable goods and rose 4.5 percent in nondurable goods. The decline in unit labor costs in the durable goods manufacturing sector was the third consecutive drop in this series.

Nonfinancial corporations

Preliminary second-quarter 2000 measures of productivity and costs also were announced today for nonfinancial corporations (tables B and 6). Productivity increased 5.0 percent during the second quarter, as output rose 5.9 percent and hours increased 0.9 percent (seasonally adjusted annual rates). 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 5.6 percent in the second quarter, the largest rise since a 5.7-percent increase in the fourth quarter of 1997. When the rise in consumer prices is taken into account, real hourly compensation increased 1.9 percent in the second quarter of 2000 (table 6).

Unit labor costs for nonfinancial corporations increased 0.6 percent in the second quarter of 2000, after declining in the two previous quarters. Unit profits rose 13.5 percent in the second quarter, marking the second consecutive quarter with a two-digit increase. The implicit price deflator for nonfinancial corporate output rose 2.4 percent in the second quarter of 2000.

Revised Measures

Current and previous measures for the second quarter of 2000 for the business, nonfarm business, and manufacturing sectors are compared in table C. The quarterly movements differ from those reported on Aug. 8 based on information then available. In the business and nonfarm business sectors, upward changes in output and downward revisions to hours led to larger increases in productivity than previously reported. In the manufacturing sector, productivity also was revised up, as an upward revision to output more than offset an upward revision to hours.