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

2.2 percent in the business sector and 2.1 percent in the nonfarm business sector.

In both sectors, increases in productivity were smaller than reported on Aug. 7; both output and hours movements were revised down. (See table C.)

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

1.1 percent in manufacturing, 1.7 percent in durable goods manufacturing, and 0.0 percent in nondurable goods manufacturing.

In total manufacturing, the change in productivity was revised to show a small increase in the second quarter, compared with the preliminary estimate of a slight decline. 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 differences between these measures and the preliminary second-quarter figures issued on Aug. 7 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 2001, business sector productivity rose at a 2.2 percent annual rate, as output decreased 0.8 percent and hours of all persons engaged in the sector fell 2.9 percent (tables A and 1). This was the first decline in business sector output since the first quarter of 1993, when it fell 1.5 percent. The drop in hours of all persons was the largest since a 4.6-percent decline in the first quarter of 1991.

A 5.4-percent rise in hourly compensation in the second quarter of 2001 was similar to the 5.3-percent increase one quarter earlier (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 2.2 percent in the second quarter of 2001, after rising 1.1 percent in the first quarter.

Changes in unit labor costs reflect changes in both hourly compensation and productivity. Unit labor costs increased 3.1 percent in the second quarter of 2001, after rising 5.3 percent in the first quarter (seasonally adjusted annual rates). The implicit price deflator for the business sector rose 1.8 percent in the second quarter, as the increase in unit labor costs was partially offset by a 0.5 percent drop in unit nonlabor payments.

Nonfarm business

Productivity in the nonfarm business sector increased 2.1 percent during the second quarter of 2001, as output declined 0.5 percent and hours of all persons fell 2.6 percent (table A). As in the larger business sector, this was the first drop in output since the first quarter of 1993, when it fell 1.3 percent. The drop in hours was the largest since the first quarter of 1991, when hours decreased 4.8 percent. In the first quarter of 2001, nonfarm productivity had increased 0.1 percent, as output and hours grew 1.4 and 1.3 percent, respectively (table 2).

Hourly compensation grew at a 4.8 percent annual rate in the second quarter of 2001, following a 5.1 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 2001.

Unit labor costs increased 2.7 percent in the second quarter of 2001. This measure had increased 5.0 percent in the first quarter. Unit nonlabor payments fell 0.4 percent in the second quarter of 2001, and the implicit price deflator for nonfarm business output rose 1.6 percent (seasonally adjusted annual rates).

Manufacturing

In the second quarter of 2001, productivity increased 1.1 percent in manufacturing, as the decline in output, 4.8 percent, was outpaced by the drop in hours of all persons, 5.8 percent (seasonally adjusted annual rates). The second-quarter increase in output per hour was due entirely to the 1.7- percent productivity gain in the durable goods sector, as output per hour remained unchanged in the nondurable goods sector (tables 3, 4, and 5). In durable goods, output fell 5.1 percent, and hours declined 6.7 percent. In nondurable goods, output and hours both fell 4.4 percent.

The hourly compensation of all manufacturing workers increased 6.2 percent during the second quarter of 2001, reflecting a 6.4-percent rise in hourly compensation in durable goods industries and a 6.1-percent increase in the nondurable goods sector. Real hourly compensation in the total manufacturing sector grew 3.1 percent in the second quarter.

Unit labor costs in manufacturing rose 5.1 percent in the second quarter of 2001. Unit labor costs increased 4.6 percent in durable goods and 6.1 percent in nondurable goods.

Nonfinancial corporations

Preliminary second-quarter 2001 measures of productivity and costs also were announced today for nonfinancial corporations (tables B and 6). Productivity increased 2.8 percent during the second quarter, as output rose 0.2 percent while hours fell 2.5 percent (seasonally adjusted annual rates). The 0.2-percent output increase was the smallest since a 2.3-percent decline in the first quarter of 1993. The second-quarter 2001 drop in hours was the largest since a decline of 2.7 percent in the second quarter of 1991. 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 6.2 percent in the second quarter. When the rise in consumer prices is taken into account, real hourly compensation increased 3.0 percent in the second quarter of 2001 (table 6).

Unit labor costs for nonfinancial corporations increased 3.3 percent in the second quarter of 2001, less than the 5.0-percent growth in the first quarter of the year. Unit profits fell 17.1 percent in the second quarter, marking four consecutive quarters of declines. The implicit price deflator for nonfinancial corporate output rose 2.2 percent in the second quarter of 2001.

Revised Measures

Current and previous measures for the second quarter of 2001 for the business, nonfarm business, and manufacturing sectors are compared in table C. The quarterly movements differ from those reported on Aug. 7 based on information then available. In the business and nonfarm business sectors, both output and hours were revised down--output more than hours. As a result of these revisions, reported productivity growth was revised down. Unit labor costs in both sectors grew more rapidly than first reported. In the manufacturing sector, productivity was revised up, as output did not fall as much as originally reported, and hours were revised down further. Unit labor costs in manufacturing grew more slowly than reported on Aug. 7.