2001 Second 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.

Second Quarter 2001

The Bureau of Labor Statistics of the U.S. Department of Labor reported preliminary productivity data--as measured by output per hour of all persons- -for the second quarter of 2001. The preliminary seasonally adjusted annual rates of productivity change in the second quarter were:

2.8 percent in the business sector and 2.5 percent in the nonfarm business sector.

In the business sector, productivity growth was the result of a drop of 2.7 percent in hours, while output showed no change. This same pattern occurred in nonfarm businesses, as hours fell 2.4 percent and output grew only 0.1 percent.

In manufacturing, the preliminary productivity changes in the second quarter were:

-0.2 percent in manufacturing, 1.0 percent in durable goods manufacturing, and -2.3 percent in nondurable goods manufacturing.

Manufacturing productivity fell 0.2 percent in the second quarter, after falling 3.6 percent (as revised) in the previous quarter. These were the first declines in manufacturing productivity since the second and third quarters of 1993, when labor productivity fell 0.3 and 0.6 percent, respectively. 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. Second-quarter measures are summarized in table A and appear in detail in tables 1 through 5.

The data in this release reflect the regular multi-year GDP revisions released by the Bureau of Economic Analysis of the U.S. Department of Commerce on July 27. They also reflect the annual benchmark revision to the BLS establishment survey data and revisions to hours series released by BLS on June 1. All employment and hours series incorporate new information on seasonal patterns. See Revised Measures. Appendix tables 1-6 show revised historical series.

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 2001, business sector productivity increased at a 2.8-percent annual rate. Output showed no change, while hours of all persons engaged in the sector fell at a 2.7- percent annual rate. As revised, labor productivity held steady in the first quarter of 2001, when both output and hours increased at a 1.2-percent annual rate (table 1).

Hourly compensation increased 5.2 percent in the second quarter and 5.3 percent in the first quarter of 2001 (seasonally adjusted annual rates). 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, grew at a 2.1-percent annual rate during the second quarter of 2001, after rising 1.1 percent during the previous quarter.

Unit labor costs, which reflect changes in both hourly compensation and productivity, increased 2.4 percent during the second quarter, following a 5.3-percent rise in the first quarter of 2001. The implicit price deflator for the business sector, which reflects changes in unit labor costs and unit nonlabor payments, increased 1.9 percent in the second quarter and 2.9 percent in the first quarter of 2001.

Nonfarm business

Productivity increased 2.5 percent in the nonfarm business sector during the second quarter of 2001, as output edged up 0.1 percent and hours of all persons fell 2.4 percent (seasonally adjusted annual rates). This was the largest decline in hours since the first quarter of 1991, when they fell 4.8 percent. Output per hour rose 0.1 percent in the first quarter of 2001, as output increased 1.4 percent and hours increased 1.3 percent (table 2).

Hourly compensation increased 4.7 percent in the second quarter, after posting a 5.1- percent gain in the first quarter of 2001. When the rise in consumer prices is taken into account, real hourly compensation for the second quarter of 2001 rose 1.6 percent.

Unit labor costs increased 2.1 percent in the second quarter of 2001, after rising 5.0 percent one quarter earlier. The implicit price deflator for nonfarm business output grew 1.7 percent in the second quarter and 2.7 percent in the first quarter of 2001.

Manufacturing

Productivity decreased 0.2 percent in manufacturing, as output fell 5.8 percent and hours of all persons declined by 5.6 percent (seasonally adjusted annual rates). In the previous quarter, productivity declined by 3.6 percent, as output fell 8.1 percent and hours dropped 4.7 percent. Growth in second-quarter productivity differed in the durable and nondurable goods subsectors. In durable goods, productivity rose 1.0 percent as the drop in hours of all persons, 6.6 percent, exceeded the drop in output, 5.7 percent. In nondurable goods, productivity declined 2.3 percent, as the decrease in hours, 3.9 percent, was less than the drop in output, 6.1 percent (tables 3, 4, and 5).

Hourly compensation of all manufacturing workers increased 6.2 percent during the second quarter. This reflects growth of 6.3 percent in durable goods and 6.1 percent in nondurable goods. When the increase in consumer prices is taken into account, the real hourly compensation of all manufacturing workers rose 3.0 percent in the second quarter. This had risen 1.9 percent in the first quarter.

Unit labor costs in manufacturing rose 6.4 percent in the second quarter, less than the 10.1 percent increase in the previous quarter. Reflecting the differing growth rates in productivity in the second quarter, unit labor costs grew dissimilarly in the two subsectors. Unit labor costs rose 5.3 percent in durable goods manufacturing and 8.6 percent in nondurable goods manufacturing.

Revised Measures

Current and previous measures for the first quarter of 2001 for the business, nonfarm business, and manufacturing sectors are compared in table B. In the business and nonfarm business sectors, productivity was revised up and unit labor costs revised down from the figures reported on June 6, based on information then available. Output was revised up slightly and hours were revised down. In manufacturing, productivity growth was revised down to reflect a larger decline in output and a smaller drop in hours than originally reported. Unit labor costs were higher than originally reported, reflecting both the downward revision to productivity and an upward revision to hourly compensation.

Output data for the business and nonfarm business sectors and compensation series for all sectors incorporate the revisions of the national income and product accounts produced by the Bureau of Economic Analysis, U.S. Department of Commerce. Labor input measures have been revised to reflect the annual benchmarking of employment levels derived from the monthly Current Employment Statistics (CES) survey that occurred on June 1. Updated seasonal adjustment factors also have been incorporated into the labor input measures. These revisions extend back to the first quarter of 1996. Appendix tables 1- 6 present quarterly and annual measures for all sectors for 1996-98.

Revised measures: Nonfinancial Corporations

Productivity and cost measures for the first quarter for nonfinancial corporations also were revised to incorporate more recent information than was available on June 5. Productivity was revised upward to reflect both an upward revision to output and a downward revision to employee hours. Unit labor costs were lower than originally reported, reflecting the higher productivity and a slight downward revision to hourly compensation. Unit profits also were revised down (table C).