2001 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 2001

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

-1.4 percent in the business sector, and -1.2 percent in the nonfarm business sector.

In both sectors, the first-quarter productivity gains were lower than those reported initially on May 8. (These data do not reflect the employment benchmark of the BLS Current Employment Statistics data released on June 1.)

In manufacturing, the revised productivity changes in the first quarter were: -2.1 percent in manufacturing, -2.4 percent in durable goods manufacturing, and -2.0 percent in nondurable goods manufacturing.

The declines in manufacturing productivity reflected decreases in output that were larger than the corresponding decreases in hours worked. The productivity decline in manufacturing was the first recorded since the third quarter of 1993, when it fell 0.6 percent. 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. 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 2000 to the first quarter of 2001, business productivity decreased 1.4 percent, reflecting increases of 1.0 percent in output and 2.4 percent in hours of all persons (seasonally adjusted annual rates). This was the largest decline in output per hour since the first quarter of 1993, when it fell 4.7 percent. During the fourth quarter of 2000, productivity had increased 2.9 percent, when output rose 0.7 percent and hours fell 2.1 percent (table 1).

Hourly compensation increased 5.2 percent during the first quarter of 2001. 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, increased 1.0 percent in the first quarter.

Unit labor costs, which reflect changes in both hourly compensation and productivity, increased 6.7 percent during the first quarter. The implicit price deflator for business output, which reflects changes in both unit labor costs and unit nonlabor payments, increased 2.8 percent in the first quarter.

Nonfarm business

Productivity fell 1.2 percent in the nonfarm business sector during the first quarter of 2001, reflecting a 1.0-percent rise in output and a 2.2- percent increase in hours of all persons. In the fourth quarter of 2000, nonfarm business productivity grew 2.0 percent, as output rose 0.8 percent and hours decreased 1.3 percent (table 2).

The first-quarter 2001 increase in hourly compensation, 5.1 percent, was smaller than the 6.6-percent increase reported for the fourth quarter of 2000. When the rise in consumer prices is taken into account, there was a 0.9-percent gain in real hourly compensation in the first quarter of 2001.

The 6.3-percent increase in unit labor costs during the first quarter was the largest posted since the fourth quarter of 1990, when unit labor costs rose 6.8 percent. The implicit price deflator for nonfarm business output rose 2.6 percent in the first quarter of 2001.

Manufacturing

Productivity fell 2.1 percent in manufacturing in the first quarter of 2001, as output dropped 7.8 percent and hours of all persons declined 5.8 percent (seasonally adjusted annual rates). This was the largest decline in labor productivity in the manufacturing sector since the third quarter of 1989, when it fell 3.2 percent. In durable goods industries, productivity fell 2.4 percent in the first quarter of 2001. This reflected a large decrease in output, 9.3 percent, and a decline of 7.1 percent in hours of all persons. In nondurable goods industries, productivity fell 2.0 percent as output and hours dropped 5.8 and 3.8 percent, respectively (tables 3, 4, and 5).

Hourly compensation in manufacturing rose 4.7 percent during the first quarter. This increase reflects a rise of 4.0 percent in the hourly compensation of persons in durable goods industries and a larger increase, 6.4 percent, in the hourly compensation of workers in nondurable goods industries. Real hourly compensation, which takes account of changes in consumer prices, rose 0.5 percent for all manufacturing workers.

The combination of a 2.1-percent drop in manufacturing productivity and a 4.7-percent increase in hourly compensation in the first quarter caused unit labor costs in manufacturing to rise 7.0 percent. The last time unit labor costs rose this much in one quarter was in the first quarter of 1991, when they rose 7.2 percent. Unit labor costs rose in both parts of manufacturing in the first quarter of 2001. In durable goods industries, they rose 6.5 percent, and, in nondurable goods industries, they rose even more, 8.6 percent.

Nonfinancial corporations

Preliminary first-quarter 2001 measures of productivity and costs for nonfinancial corporations also were announced today (tables B and 6). Productivity dropped slightly, 0.1 percent, in the first quarter, as output increased 0.4 percent and employee-hours grew 0.5 percent (seasonally adjusted annual rates). The last time productivity fell in the nonfinancial corporate sector was the first quarter of 1997, when it dropped 3.1 percent. 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 5.9 percent during the first quarter of 2001, down from a 7.4-percent rise in the previous quarter. When the rise in consumer prices is taken into account, real hourly compensation rose 1.7 percent in the first quarter. Unit labor costs in nonfinancial corporations rose 6.0 percent in the first quarter, less than the 7.1-percent rise one quarter earlier.

Unit profits fell 16.2 percent in first-quarter 2001 and 38.5 percent in the fourth quarter of 2000. They have fallen in 9 of the last 14 quarters. The implicit price deflator for nonfinancial corporate output rose 1.9 percent in the first quarter of 2001.

REVISED MEASURES

Current and previous measures for the first quarter of 2001 for business, nonfarm business, and manufacturing are compared in table C. In the business, nonfarm business, and manufacturing sectors, output and productivity were revised down from the data reported on May 8, based on information then available. As a result, unit labor costs were revised upward.