2002 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 2002

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 2002. The revised seasonally adjusted annual rates of productivity change in the first quarter were:

8.3 percent in the business sector and 8.4 percent in the nonfarm business sector.

In both sectors, the first-quarter productivity gains were slightly lower than those reported initially on May 7.

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

9.4 percent in manufacturing, 13.3 percent in durable goods manufacturing, and 4.6 percent in nondurable goods manufacturing.

Manufacturing productivity rose as first-quarter output increased while hours of all persons working in the sector declined for the seventh consecutive quarter. 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

Productivity increased 8.3 percent in the business sector (seasonally adjusted annual rate) from the fourth quarter of 2001 to the first quarter of 2002, as output increased 6.2 percent and hours worked by all persons decreased 2.0 percent (table 1). The gain in output per hour was the largest since the first quarter of 1973, when growth was 8.4 percent.

Hourly compensation increased 2.9 percent during the first quarter of 2002. 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 1.4 percent in the first quarter.

Unit labor costs, which reflect changes in both hourly compensation and productivity, dropped 5.0 percent during the first quarter of 2002. The decline in unit labor costs was the largest since a fall of 7.5 percent in the first quarter of 1955. The implicit price deflator for business output, which reflects changes in both unit labor costs and unit nonlabor payments, was unchanged between the fourth quarter of 2001 and the first quarter of 2002.

Nonfarm business

Productivity rose 8.4 percent in the nonfarm business sector during the first quarter of 2002, reflecting a 6.1-percent rise in output and a 2.1- percent decrease in working hours of all persons. The increase in output per hour was the largest since the second quarter of 1983, when growth was 9.9 percent. Hours worked in the nonfarm business sector now have declined in seven of the last eight quarters (table 2).

Hourly compensation increased 2.8 percent in the first quarter of 2002. When the rise in consumer prices is taken into account, real hourly compensation gained 1.4 percent in the first quarter.

The 5.2-percent decrease in unit labor costs during the first quarter of 2002 was the largest posted since the second quarter of 1983, when these costs fell 6.5 percent. The implicit price deflator for nonfarm business output declined 0.6 percent in the first quarter of 2002.

Manufacturing

Productivity rose 9.4 percent in manufacturing in the first quarter of 2002, as output increased 2.9 percent and working hours of all persons declined 5.9 percent (seasonally adjusted annual rates). In durable goods industries, productivity grew 13.3 percent, reflecting an output increase of 4.8 percent and a decline of 7.5 percent in hours of all persons. In nondurable goods industries, productivity rose 4.6 percent as output rose 1.0 percent and hours dropped 3.5 percent (tables 3, 4, and 5).

Hourly compensation in manufacturing rose 2.4 percent during the first quarter. This increase reflects a rise of 1.9 percent in the hourly compensation of persons in durable goods industries and a larger increase, 3.8 percent, in the hourly compensation of workers in nondurable goods industries. Real hourly compensation, which takes account of changes in consumer prices, rose 1.0 percent for all manufacturing workers.

The combination of a 9.4-percent rise in manufacturing productivity and a 2.4-percent increase in hourly compensation in the first quarter caused unit labor costs in manufacturing to fall 6.4 percent. The last time unit labor costs fell this much in one quarter was in the second quarter of 1961, when they fell 6.9 percent. Unit labor costs declined in both sectors of manufacturing in the first quarter of 2002. In durable goods industries, they fell 10.1 percent, the largest decline since a 10.3-percent drop in the first quarter of 1960. In nondurable goods industries, unit labor costs fell 0.7 percent in the first quarter of 2002.

Nonfinancial corporations

Preliminary first-quarter 2002 measures of productivity and costs for nonfinancial corporations also were announced today (tables B and 6). Productivity rose 6.7 percent in the first quarter, less than the 11.2- percent rise recorded in the fourth quarter of 2001. Output increased 5.4 percent in first quarter 2002, while employee-hours declined 1.2 percent (seasonally adjusted annual rates). This marked the fourth consecutive decline in hours of nonfinancial corporate employees, as employment fell in all four quarters. However, average weekly hours fell only in the last three quarters of 2001; they rose 1.0 percent in the first quarter of 2002. 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 3.6 percent during both the fourth quarter of 2001 and the first quarter of 2002. When the rise in consumer prices is taken into account, real hourly compensation rose 2.1 percent in the first quarter. Unit labor costs in nonfinancial corporations declined 2.9 percent in the first quarter, less than the 6.8-percent drop one quarter earlier. This was the first two-quarter decline in unit labor costs to occur since the second and third quarters of 1997, when they fell 0.6 and 1.7 percent, respectively.

Unit profits grew 15.5 percent in first quarter 2002, less than the 58.0-percent climb in the fourth quarter of 2001. Unit profits had fallen in the previous five quarters. The implicit price deflator for nonfinancial corporate output declined 0.8 percent in the first quarter of 2002.

REVISED MEASURES

Current and previous measures for the first quarter of 2002 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 7, based on information then available. As a result, unit labor costs were revised upward.