2003 First 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.

First Quarter 2003

The Bureau of Labor Statistics of the U.S. Department of Labor today reported preliminary productivity data--as measured by output per hour of all persons--for the first quarter of 2003. The seasonally adjusted annual rates of productivity change in the first quarter were:

2.2 percent in the business sector and 1.6 percent in the nonfarm business sector.

These productivity increases occurred as modest output increases were combined with modest declines in the hours worked. In the business sector, output grew 1.7 percent and hours of all persons fell 0.5 percent. In nonfarm businesses, output rose 1.4 percent and hours dropped 0.1 percent. First-quarter measures are summarized in table A and appear in detail in tables 1 through 5.

In manufacturing, productivity changes in the first quarter were:

2.1 percent in manufacturing, 2.4 percent in durable goods manufacturing, and 1.7 percent in nondurable goods manufacturing.

Productivity growth in manufacturing in the first quarter of 2003 reflected decreases in both output and hours; output declined 0.6 percent and hours of all persons fell 2.6 percent (seasonally adjusted annual rates). Output and hours in manufacturing, which includes about 15 percent of U.S. business sector employment, tend to vary more from quarter to quarter than data for the 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 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 in the business sector increased 2.2 percent between the fourth quarter 2002 and the first quarter 2003, as output grew 1.7 percent and hours of all persons engaged in the sector dropped 0.5 percent (seasonally adjusted annual rates). Revised data for the fourth quarter of 2002 show that output per hour increased 0.3 percent, reflecting a 1.7- percent rise in output and a 1.5-percent increase in hours at work. (See table 1.)

Hourly compensation increased 3.9 percent during the first quarter of 2003. This measure includes wages and salaries, supplements, employer contributions to employee benefit plans, and taxes. Hourly compensation had risen 3.6 percent in the previous quarter. Real hourly compensation, which takes into account changes in consumer prices, increased 0.1 percent in the first quarter of 2003, less than the 1.6-percent increase in the fourth quarter of 2002.

Unit labor costs rose 1.7 percent in the first quarter of 2003, down from the 3.3-percent increase in the fourth quarter. Unit labor costs grew noticeably slower in the first quarter than in the fourth quarter because the higher growth in productivity was more than enough to offset the larger increase in hourly compensation. Growth in unit labor costs is roughly equivalent to the change in hourly compensation less the change in output per hour.

The implicit price deflator for the business sector, which reflects changes in both unit labor costs and unit nonlabor payments, rose 1.8 percent in the first quarter. The implicit price deflator rose 1.5 percent in the final quarter of 2002.

Nonfarm business

Productivity rose 1.6 percent in the nonfarm business sector in first- quarter 2003, as output increased 1.4 percent and hours of all persons decreased 0.1 percent (seasonally adjusted annual rates). In the fourth quarter of 2002, productivity had increased 0.7 percent, as output rose 1.7 percent and hours increased by 0.9 percent. (See table 2.)

Hourly compensation increased at a 3.5 percent annual rate in the first quarter of 2003, down from the 3.9-percent increase in the fourth quarter. When the rise in consumer prices was taken into account, real hourly compensation fell 0.3 percent in the first quarter; it had increased 1.9 percent in the fourth quarter of 2002.

Unit labor costs grew 1.9 percent in the first quarter of 2003 and 3.2 percent in the fourth quarter of 2002. The implicit price deflator for nonfarm business output rose 1.7 percent in the first quarter and 1.4 percent one quarter earlier.

Manufacturing

Productivity increased 2.1 percent in manufacturing in the first quarter of 2003, as output decreased 0.6 percent and hours of all persons declined 2.6 percent (seasonally adjusted annual rates). Both output and hours also had fallen in fourth-quarter 2002--by 3.7 and 3.2 percent, respectively--and productivity declined 0.5 percent. In the first quarter of 2003, productivity grew 2.4 percent in durable goods manufacturing, where output increased 0.3 percent and hours fell 2.0 percent. Nondurable goods manufacturing productivity rose 1.7 percent, reflecting a 1.7 percent drop in output and a 3.3 percent decline in hours of all persons.

Hourly compensation of all manufacturing workers rose 4.8 percent during the first quarter, and real hourly compensation increased 1.0 percent. The hourly compensation of workers in durable goods manufacturing rose 4.5 percent, while that of employees in nondurable goods manufacturing grew 5.2 percent.

Unit labor costs in manufacturing rose 2.7 percent in the first quarter of 2003, as unit labor costs of durable goods producers increased 2.1 percent and those of nondurable goods producers increased more, 3.4 percent.

Fourth-quarter and annual measures for nonfinancial corporations

Fourth-quarter and annual 2002 measures of productivity and costs also were announced today for the nonfinancial corporate sector (tables B, C, and 6). Output per all-employee hour grew 5.0 percent from the third to the fourth quarter of 2002, as output grew 4.5 percent and employee hours fell 0.5 percent. The nonfinancial corporate sector includes 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 increased 4.9 percent in the fourth quarter, and real hourly compensation rose 2.8 percent. Unit labor costs fell 0.1 percent in the fourth quarter of 2002--the seventh consecutive drop in these costs. In the fourth quarter, unit profits increased at a 20.8 percent annual rate after falling 11.2 percent in the previous quarter. The implicit price deflator for nonfinancial corporate output grew 0.9 percent during the fourth quarter of 2002, compared with a 0.5 percent decrease in the third quarter.

Productivity grew 5.5 percent in calendar year 2002 for nonfinancial corporations, following an increase of 1.4 percent in the previous year. (See table C.) Nonfinancial corporate output grew 3.2 percent in 2002, and employee hours decreased 2.2 percent. This was the second consecutive decrease in employee hours.

Hourly compensation grew 3.3 percent in 2002, and real hourly compensation increased 1.7 percent. Total unit costs fell 1.3 percent, reflecting a 2.1 decrease in unit labor costs and a 0.9 percent rise in unit nonlabor costs. Unit profits rose 9.0 percent in 2002, the first annual increase since a 3.1-percent rise in 1997. The implicit price deflator, which reflects both the unit costs and unit profits measures, dropped 0.5 percent in 2002.

Revised measures

Current and previous measures for the third and fourth quarters of 2002 for the business, nonfarm business, and manufacturing sectors are compared in table D. Some of the quarterly movements differ from those reported on March 6. Hourly compensation, real hourly compensation, and unit labor costs in the business and nonfarm business sectors were revised down. In manufacturing, fourth quarter output and productivity were revised down while unit labor costs were revised up.

For third-quarter 2002, hourly compensation was revised down sharply in the business, nonfarm business, and manufacturing sectors; unit labor costs were revised down accordingly. Unit labor costs in the business and nonfarm business sectors now show declines of 3.4 percent in the third quarter. In the manufacturing sector, unit labor costs dropped 3.9 percent in the third quarter compared to the 0.1-percent increase reported on March 6.

The Consumer Price Index Research Series has been updated. This affected indexes of real hourly compensation for all years.

Revised measures: Nonfinancial Corporations

Productivity and cost measures for nonfinancial corporations for the third quarter of 2002 also were revised to incorporate more recent information than was available on March 6. Productivity and output in this sector were revised down for the third quarter of 2002. Productivity grew at an annual rate of 3.4 percent, compared with the increase of 5.5 percent published March 6. Hourly compensation was revised down more than output per hour, so unit labor costs fell 0.5 percent, rather than increasing. (See tables E and 6.)

Third quarter 2002