2001 Fourth 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.

Fourth Quarter and Annual Averages, 2001

The Bureau of Labor Statistics of the U.S. Department of Labor today reported revised fourth-quarter seasonally-adjusted annual rates of productivity change--as measured by output per hour of all persons- -and revised annual changes for the full year 2001. Percent changes in business and nonfarm business productivity were:

Business sector 5.1 1.9 Nonfarm business sector 5.2 1.9

In both sectors, fourth-quarter productivity was higher than originally reported due to upward revisions to the output measures. Fourth-quarter productivity and related measures are summarized in table A and appear in detail in tables 1 through 5; the preliminary and revised fourth-quarter and annual data appear in table C.

In the manufacturing sector, increases in productivity were:

Manufacturing 4.1 1.1 Durable goods manufacturing 2.7 0.5 Nondurable goods manufacturing 5.2 1.6

Manufacturing productivity rose 4.1 percent (seasonally adjusted annual rate) in the fourth quarter. This increase was higher than originally reported, reflecting upward revisions to output per hour in both the durable and nondurable goods manufacturing subsectors. (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 data 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.

THIRD-TO-FOURTH QUARTER 2001 CHANGES

Business

Business sector productivity rose 5.1 percent (seasonally adjusted annual rate) in the fourth quarter of 2001, as output increased 1.3 percent and hours of all persons engaged in the sector decreased 3.6 percent (table 1). The fourth-quarter decrease in hours was the largest since the first quarter of 1991, when hours fell 4.6 percent. During third-quarter 2001, productivity had increased 0.7 percent as output declined 2.3 percent and hours fell 2.9 percent.

Hourly compensation grew at a 2.2-percent annual rate in the fourth quarter, compared with a 3.3-percent rise in the third 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, rose 2.5 percent in both the third and fourth quarters of 2001.

Unit labor costs, which reflect changes in both hourly compensation and productivity, decreased 2.7 percent during the fourth quarter. The implicit price deflator for business output, which reflects changes in unit labor costs and unit nonlabor payments, decreased 1.4 percent in the fourth quarter. This measure rose 1.9 percent during the third quarter.

Nonfarm business

In the nonfarm business sector, productivity rose at an annual rate of 5.2 percent in the fourth quarter of 2001, as output grew 1.2 percent and hours of all persons--employees, proprietors, and unpaid family workers--fell 3.8 percent (seasonally adjusted annual rates). During the third quarter, productivity had increased 1.1 percent, output had decreased 2.3 percent, and hours had declined 3.4 percent (table 2).

Hourly compensation rose 2.3 percent in the fourth quarter. This was the smallest increase in this measure since the second quarter of 1997, when hourly compensation increased 1.4 percent. When the increase in consumer prices was taken into account, real hourly compensation rose 2.6 percent in the fourth quarter of 2001.

Unit labor costs fell 2.7 percent in the fourth quarter, after rising 2.6 percent in the third quarter. The implicit price deflator for nonfarm business edged down 0.6 percent in the fourth quarter, as a 3.4 percent increase in unit nonlabor payments offset much of the decline in unit labor costs.

Manufacturing

Manufacturing productivity rose 4.1 percent (seasonally adjusted annual rate) in the fourth quarter of 2001, as output fell 6.7 percent and hours dropped by 10.4 percent (table 3). Productivity rose in both of the manufacturing subsectors. In durable goods, productivity increased 2.7 percent, reflecting declines of 9.8 percent in output and 12.3 percent in hours. In nondurable goods, productivity grew 5.2 percent, reflecting a 2.6-percent drop in output and a 7.5-percent decline in hours (tables 4 and 5). The 9.8-percent decline in durable goods output was the largest since a 14.5-percent drop in the first quarter of 1991. Similarly, the last time hours fell more than 12.3 percent in durable goods was the third quarter of 1982, when they declined by 13.2 percent.

Hourly compensation of all manufacturing workers increased 2.5 percent during the fourth quarter, rising in both of the manufacturing subsectors--3.6 percent in durable goods and 1.2 percent in nondurable goods. When the increase in consumer prices was taken into account, real hourly compensation for all manufacturing workers rose 2.8 percent in the fourth quarter.

Unit labor costs in manufacturing fell 1.5 percent in the fourth quarter of 2001, reflecting differing trends in the two subsectors. Unit labor costs rose 0.8 percent in durable goods manufacturing and declined 3.8 percent in nondurable goods manufacturing. This was the second consecutive decline in unit labor costs for nondurable goods which fell 0.1 percent in the third quarter of 2001.

ANNUAL AVERAGE CHANGES, 2000-2001

Business

In calendar year 2001, business sector productivity increased 1.9 percent, after having increased 3.4 percent in 2000 (table 1). Output grew 0.9 percent in 2001 and 4.6 percent in 2000. Hours of all persons in the business sector fell 1.0 percent in 2001.

Percent change from previous year

Hourly compensation increased 5.9 percent in 2001, after having increased 6.4 percent in 2000. Real hourly compensation increased 3.0 percent in both 2000 and 2001. Calendar year 2001 was the sixth consecutive year of growth in real hourly compensation, following three years of declines (1993-95).

Unit labor costs increased 3.9 percent in 2001, more than in any year since 1990, when unit labor costs rose 4.3 percent. The implicit price deflator rose 1.8 percent in 2001, compared with a 1.9-percent increase in 2000.

Nonfarm business

Productivity increased 1.9 percent in the nonfarm business sector during 2001; output grew 0.9 percent and hours of all persons fell 0.9 percent. As in the business sector, this was the first annual decline in hours since 1992, when hours edged down 0.2 percent. In 2000, productivity rose 3.3 percent, as output grew 4.5 percent and hours of all persons rose 1.1 percent.

Hourly compensation grew 5.8 percent in 2001, compared with a 6.5- percent increase in 2000. Real hourly compensation increased 2.8 percent in 2001, following a 3.1-percent gain the previous year.

Unit labor costs in the nonfarm business sector rose 3.8 percent in 2001, more than the 3.1-percent increase posted in 2000. The implicit price deflator, which reflects nonlabor payments as well as labor costs, rose 1.7 percent in 2001, following a 2.0-percent rise in 2000.

Manufacturing

Manufacturing productivity grew 1.1 percent in 2001, the smallest increase since a 0.1-percent rise in 1989. Output fell 4.3 percent in 2001, and hours of all persons working in the sector dropped 5.3 percent. Labor productivity increased 0.5 percent in durable goods manufacturing, reflecting declines of 5.4 percent in output and 5.9 percent in hours. In nondurable goods manufacturing, productivity rose 1.6 percent in 2001, output fell 2.9 percent, and hours declined 4.4 percent (tables B, 3, 4, and 5).

Hourly compensation of manufacturing workers increased 7.3 percent in 2001, somewhat faster than the 7.0 percent increase a year earlier. Real hourly compensation rose 4.4 percent in 2001, the largest increase since 1956 (when it rose 4.9 percent). The hourly compensation increases in the two subsectors were 7.9 percent in durable goods and 6.4 percent in nondurable goods.

Unit labor costs grew 6.2 percent in manufacturing. In durable goods, unit labor costs rose 7.4 percent in 2001, after declining in each of the previous nine years. Unit labor costs also rose in nondurable goods industries last year, by 4.7 percent.

REVISED MEASURES

Productivity and cost data for the fourth-quarter and full-year 2001 for business, nonfarm business, and manufacturing were revised to incorporate the most recent information (table C). In the business and nonfarm business sectors, changes in productivity and output are higher--and decreases in unit labor costs are greater--than those reported on Feb. 6, based on information available at that time. Fourth-quarter measures of manufacturing productivity also were revised up from those reported on Feb. 6, reflecting a smaller decline in output than originally reported. As a result, unit labor costs in manufacturing showed a larger drop than originally reported. Annual measures of productivity and costs are similar to those reported on Feb. 6. Measures of real hourly compensation in the business, nonfarm business, and manufacturing sectors for 2001 were revised to incorporate the annual recalculation of seasonal factors for the Consumer Price Index.

Percent change, third to fourth quarter 2001