2001 First 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.

First Quarter 2001

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 first quarter of 2001. The seasonally adjusted annual rates of productivity change in the first quarter were:

-0.4 percent in the business sector and -0.1 percent in the nonfarm business sector.

Although productivity fell slightly in the business and nonfarm business sectors, both output and hours registered increases. In the business sector, output rose 1.8 percent and hours of all persons increased 2.2 percent. Output in nonfarm business rose 1.9 percent, and hours grew 2.0 percent. First-quarter measures are summarized in table A and appear in detail in tables 1 through 5.

In manufacturing, productivity changes in the first quarter were:

0.3 percent in manufacturing, -0.1 percent in durable goods manufacturing, and 0.6 percent in nondurable goods manufacturing.

Productivity growth in manufacturing in the first quarter of 2001 reflected a decline of 5.7 percent in output and a drop of 6.0 percent in the hours of all persons. Output and hours in manufacturing, which includes about 16 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.

Business

Productivity in the business sector declined at a 0.4 percent annual rate from the fourth quarter of 2000 to the first quarter of 2001, as output increased 1.8 percent and hours of all persons engaged in the sector rose 2.2 percent (seasonally adjusted annual rates). Productivity last declined in the business sector during the first quarter of 1995, when it fell 1.3 percent. Revised data for the fourth quarter of 2000 show that output per hour increased 2.9 percent, as output increased 0.7 percent and hours of all persons fell 2.1 percent (table 1).

Hourly compensation increased 5.2 percent during the first quarter of 2001. This measure includes wages and salaries, supplements, employer contributions to employee benefit plans, and taxes. Unit labor costs, which reflect changes in hourly compensation and productivity, increased at a 5.6 percent rate during first-quarter 2001 and at a 4.5 percent rate in fourth-quarter 2000.

Real hourly compensation, which takes into account changes in consumer prices, rose at a 1.0 percent annual rate in first-quarter 2001, following a 4.4 percent increase during fourth-quarter 2000.

The implicit price deflator for the business sector, which reflects changes in both unit labor costs and unit nonlabor payments, rose at a 2.7 percent annual rate in the first quarter.

Nonfarm business

Productivity declined 0.1 percent in the nonfarm business sector in the first quarter, as output increased 1.9 percent and hours of all persons rose 2.0 percent. During the fourth quarter of 2000, productivity had increased 2.0 percent in this sector, as output rose 0.8 percent and hours fell 1.3 percent (table 2).

Hourly compensation increased at a 5.2 percent annual rate in the first quarter of 2001. When the rise in consumer prices was taken into account, real hourly compensation rose 1.0 percent in the first quarter; it had increased 3.6 percent in the fourth quarter of 2000.

Unit labor costs rose 5.2 percent in the first quarter, after rising 4.5 percent in the fourth quarter of 2000. The first-quarter increase was the largest since the fourth quarter of 1997, when it rose 5.5 percent. The implicit price deflator for nonfarm business output rose 2.5 percent in the first quarter, compared with a 1.6 percent rise one quarter earlier.

Manufacturing

Productivity increased at a 0.3 percent seasonally adjusted annual rate in manufacturing in the first quarter of 2001, as output decreased 5.7 percent and hours of all persons declined 6.0 percent. Although output and hours also had fallen in the fourth quarter--by 1.5 and 6.6 percent, respectively--productivity grew more rapidly, by 5.5 percent. In the first quarter of 2001, productivity fell 0.1 percent in durable goods manufacturing, where output dropped 7.4 percent and hours fell 7.3 percent. Nondurable goods manufacturing productivity rose 0.6 percent, reflecting a 3.3 percent decline in output and a 3.9 percent drop in hours of all persons.

Hourly compensation of all manufacturing workers rose 4.7 percent during the first quarter, and real hourly compensation increased 0.6 percent. The hourly compensation of workers in durable goods manufacturing rose 4.0 percent, while that of employees in nondurable goods manufacturing grew 6.3 percent.

Unit labor costs in manufacturing rose 4.4 percent in the first quarter of 2001, as unit labor costs of durable goods producers rose 4.1 percent and those of nondurable goods producers increased at a 5.7 percent annual rate. The increase for total manufacturing was the largest since a 7.2 percent increase in the first quarter of 1991.

Fourth-quarter and annual measures for nonfinancial corporations

Fourth-quarter and annual 2000 measures of productivity and costs also were announced today for the nonfinancial corporate sector (tables B, C, and 6). Output per all-employee hour rose 0.3 percent from the third to the fourth quarter of 2000, as output fell 0.7 percent and employee hours fell further, 1.0 percent. This was the smallest increase in labor productivity since the second quarter of 1997, when it rose 0.1 percent. 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 7.4 percent in the fourth quarter, and real hourly compensation rose 4.3 percent. Unit labor costs grew 7.1 percent in the fourth quarter of 2000. This was the largest increase since a 7.9 percent rise occurred in the first quarter of 1982. In the fourth quarter, unit profits declined 38.5 percent--they have fallen in 8 of the last 13 quarters. The implicit price deflator for nonfinancial corporate output rose 1.2 percent during the fourth quarter of 2000, somewhat faster than the 0.5 percent increase observed in the third quarter.

Productivity grew 4.2 percent in 2000 for nonfinancial corporations, the fastest increase since 1971, when it rose by the same amount (table C). Nonfinancial corporate output grew 6.1 percent in 2000, slightly faster than the 5.9 percent increase of the previous year. Employee hours increased 1.8 percent in 2000 and 2.3 percent in 1999.

Hourly compensation grew 4.8 percent in 2000, and real hourly compensation increased 1.4 percent. Total unit costs rose 1.2 percent, reflecting an increase of 0.6 percent in unit labor costs and a 3.1- percent rise in unit nonlabor costs. Unit profits rose 1.1 percent in 2000, the first increase in the series since 1997 (when they rose 3.1 percent). The implicit price deflator, which reflects both the unit costs and unit profits measures, rose 1.2 percent in 2000.

REVISED MEASURES

Current and previous measures for the fourth quarter of 2000 for the business, nonfarm business, and manufacturing sectors are compared in table D. Some of the quarterly movements differ from those reported on March 6, based on information then available. In business and nonfarm business, productivity was revised down and unit labor costs correspondingly revised up. In manufacturing, productivity was revised up and unit labor costs down.

The Consumer Price Index Research Series has been updated. This affected indexes of real hourly compensation for all years. In manufacturing, historical output has been revised. (See Multifactor Productivity Trends, 1999, USDL 01-125.) Appendix tables 1-3 present revised data for 1996-98.