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

1.7 percent in the business sector and 1.5 percent in the nonfarm business sector.

In both sectors, increases in productivity were larger than reported on Aug. 9, due primarily to upward revisions to output. (See table C.)

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

4.3 percent in manufacturing, 6.0 percent in durable goods manufacturing, and 2.6 percent in nondurable goods manufacturing.

In total manufacturing, the change in productivity was revised to show an increase of 4.3 percent in the second quarter, compared with the preliminary estimate of 4.9 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. 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. 9 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 2002, business sector productivity rose at a 1.7 percent annual rate, as output increased 0.5 percent and hours of all persons engaged in the sector decreased 1.2 percent (tables A and 1). In the first quarter of 2002, productivity had increased 8.3 percent when output increased 5.9 percent and hours fell 2.2 percent.

A 4.0-percent rise in hourly compensation in the second quarter of 2002 was similar to the 3.8-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 0.5 percent in the second quarter of 2002, after rising 2.3 percent in the first quarter.

Changes in unit labor costs reflect changes in both hourly compensation and productivity. Unit labor costs increased 2.3 percent in the second quarter of 2002, after falling 4.2 percent in the first quarter (seasonally adjusted annual rates). The implicit price deflator for the business sector rose 0.5 percent in the second quarter, as the increase in unit labor costs was partially offset by a 2.2 percent drop in unit nonlabor payments.

Nonfarm business

Productivity in the nonfarm business sector increased 1.5 percent during the second quarter of 2002, as output rose 0.8 percent and hours of all persons declined 0.7 percent (table A). In the first quarter of 2002, output per hour in the nonfarm business sector had increased 8.6 percent, as output grew 6.2 percent and hours fell 2.2 percent (table 2).

Hourly compensation grew at a 3.7 percent annual rate in the second quarter of 2002, following a 3.6 percent increase in the first quarter. When the rise in consumer prices is taken into account, real hourly compensation increased 0.2 percent in the second quarter of 2002.

Unit labor costs increased 2.1 percent in the second quarter of 2002. This measure had decreased 4.6 percent in the first quarter. Unit nonlabor payments edged down 0.1 percent in the second quarter of 2002, and the implicit price deflator for nonfarm business output rose 1.3 percent (seasonally adjusted annual rates).

Manufacturing

In the second quarter of 2002, productivity increased 4.3 percent in manufacturing, as output increased 3.6 percent and hours of all persons declined 0.7 percent (seasonally adjusted annual rates). Hours worked in manufacturing had the smallest decline since the second quarter of 2000, when they increased 0.5 percent. In the durable goods sector, productivity grew 6.0 percent in the second quarter of 2002, as output grew 5.4 percent and hours declined 0.6 percent. In nondurable goods, output per hour rose 2.6 percent as output increased 1.8 percent and hours decreased 0.8 percent (tables 3, 4, and 5).

The hourly compensation of all manufacturing workers increased 3.0 percent during the second quarter of 2002, reflecting a 2.8-percent rise in hourly compensation in durable goods industries and a 3.4-percent increase in the nondurable goods sector. Real hourly compensation in the total manufacturing sector declined 0.4 percent in the second quarter, after increasing 5.4 percent one quarter earlier.

Unit labor costs in manufacturing fell 1.2 percent in the second quarter of 2002. This was the fourth consecutive quarterly decline in the series. Unit labor costs decreased 3.1 percent in durable goods and increased 0.8 percent in nondurable goods in the second quarter of 2002.

Nonfinancial corporations

Preliminary second-quarter 2002 measures of productivity and costs also were announced today for nonfinancial corporations (tables B and 6). Productivity increased 5.0 percent during the second quarter, as output rose 4.4 percent and hours fell 0.6 percent (seasonally adjusted annual rates). The second-quarter drop in hours was the smallest since a decline of 0.5 percent in the fourth quarter of 2000. 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 4.2 percent in the second quarter of 2002, following a 4.1 percent increase in the first quarter. When the rise in consumer prices is taken into account, real hourly compensation increased 0.8 percent in the second quarter and 2.6 percent in the first quarter of 2002 (table 6).

Unit labor costs for nonfinancial corporations decreased 0.8 percent in the second quarter of 2002, similar to the 0.9-percent decline in the first quarter of the year. Unit profits fell 3.7 percent in the second quarter of 2002, after falling 0.6 percent in the first quarter. The implicit price deflator for nonfinancial corporate output edged down 0.4 percent in the second quarter of 2002.

Revised Measures

Current and previous measures for the second quarter of 2002 for the business, nonfarm business, and manufacturing sectors are compared in table C. The quarterly movements differ from those reported on Aug. 9 based on information then available. In the business and nonfarm business sectors, output and productivity were revised up, and unit labor costs were revised down. In the manufacturing sector, productivity was revised down, as output grew less rapidly than originally reported. Unit labor costs in manufacturing fell less than reported on Aug. 9.