2000 Third Quarter (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.

Third Quarter 2000

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 third quarter of 2000. The preliminary seasonally-adjusted annual rates of productivity growth in the third quarter were:

3.2 percent in the business sector and 3.8 percent in the nonfarm business sector.

In both the business and the nonfarm business sectors, productivity increases in the third quarter were smaller than those recorded in the second quarter of 2000 (as revised).

In manufacturing, productivity increases in the third quarter were:

6.4 percent in manufacturing, 9.6 percent in durable goods manufacturing, and 2.0 percent in nondurable goods manufacturing.

The increase in manufacturing productivity was higher than the 5.7- percent rise reported for the previous quarter (as revised). 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 2000, business sector productivity increased at a 3.2 percent annual rate. Output rose 3.0 percent, while hours of all persons engaged in the sector declined 0.2 percent (seasonally adjusted annual rates). After revisions, second-quarter productivity in the business sector rose 6.9 percent, reflecting a 6.3- percent increase in output and a drop of 0.6 percent in hours (tables B and 1).

Hourly compensation increased at an annual rate of 5.8 percent during the third quarter of 2000, after increasing 7.0 percent during the second quarter. 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, increased 2.7 percent in the third quarter, after rising 3.2 percent in the second quarter of 2000.

Unit labor costs, which reflect changes in both hourly compensation and productivity, increased at a 2.5 percent annual rate during the third quarter. During the previous quarter, these costs were unchanged. The implicit price deflator for the business sector increased 1.7 percent in the third quarter and 2.4 percent in the second quarter.

Nonfarm business

Productivity rose 3.8 percent in the nonfarm business sector during the third quarter of 2000. The increase in labor productivity in the third quarter occurred as output rose 3.0 percent and hours of all persons fell 0.8 percent. This decline in hours was the largest since the first quarter of 1992, when hours fell 2.3 percent. In the previous quarter, productivity had risen 6.1 percent, as output grew 6.5 percent and hours increased 0.4 percent (table 2).

Hourly compensation increased at a 6.4 percent annual rate in the third quarter of 2000. This was the largest increase in this measure since the first quarter of 1992, when it increased 8.8 percent. When the rise in consumer prices is taken into account, real hourly compensation rose at a 3.2- percent annual rate during the July-September period. During the second quarter of 2000, real hourly compensation had risen 2.2 percent.

Unit labor costs increased 2.5 percent during the third quarter of 2000. In the second quarter, unit labor costs in the nonfarm business sector had declined 0.2 percent. The implicit price deflator for nonfarm business output rose 1.8 percent in the third quarter of 2000.

Manufacturing

Productivity increased 6.4 percent in manufacturing in the third quarter of 2000, as output grew 3.1 percent and hours of all persons dropped 3.0 percent (seasonally adjusted annual rates). A similar increase in labor productivity, 5.7 percent, was recorded in the previous quarter, reflecting increases in output and hours of 7.7 and 1.9 percent, respectively. In durable goods, productivity rose 9.6 percent in the third quarter, as output increased 6.0 percent and hours of all persons fell 3.3 percent. Productivity grew more slowly in nondurable goods, 2.0 percent, as hours fell faster than output. Output dropped 0.6 percent, and hours of all persons decreased 2.6 percent (tables 3, 4, and 5).

Hourly compensation of manufacturing workers increased an average of 6.7 percent during the third quarter, a more rapid rise than the 4.0-percent increase recorded in the previous quarter (seasonally adjusted annual rates). In the third quarter, hourly compensation grew 5.9 percent in durable goods and 8.1 percent in nondurable goods. When the increase in consumer prices is taken into account, real hourly compensation in total manufacturing rose 3.5 percent in the third quarter.

Unit labor costs increased 0.3 percent in the third quarter of 2000 after falling 1.6 percent in the second quarter of 2000. In the durable goods sector, unit labor costs in the third quarter fell 3.4 percent; these costs also had fallen in the previous three quarters. In contrast, unit labor costs in the nondurable goods sector rose 5.9 percent in the third quarter, following a 5.4-percent rise in the previous quarter.

Revised Measures

Current and previous measures for the second quarter of 2000 for the business, nonfarm business, and manufacturing sectors are compared in table B. In all these sectors, productivity, output, and hourly compensation increased faster than reported on Sept. 6, based on information then available. In all sectors, small revisions to real hourly compensation in the first and second quarters of 2000 were made as a result of incorporating the recalculated Consumer Price Index. In manufacturing, historical output has been revised for consistency with estimates published Sept. 21, 2000. (See Multifactor Productivity Trends, 1998, USDL 00-267.) Appendix tables 1-3 present annual indexes for the years 1949-99 for the manufacturing measures.

Revised measures: Nonfinancial Corporations

Second-quarter 2000 productivity and cost measures for nonfinancial corporations also were revised to incorporate more recent information than was available on Sept. 6. Productivity, output, and hourly compensation were revised up, while hours growth was unchanged. Productivity grew at an annual rate of 5.4 percent, compared with the previously published growth of 5.0 percent (tables C and 6).