2003 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 2003

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 2003. The seasonally adjusted annual rates of productivity change in the second quarter were:

7.2 percent in the business sector and 6.8 percent in the nonfarm business sector.

In both sectors, increases in productivity were larger than reported on Aug. 7, due primarily to upward revisions to output. (See table C.)

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

3.7 percent in manufacturing, 3.5 percent in durable goods manufacturing, and 3.4 percent in nondurable goods manufacturing.

In total manufacturing, the change in productivity was revised down from a preliminary estimate of 4.2 percent. 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 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 (page 8).

Business

From the first quarter to the second quarter of 2003, productivity in the business sector grew at a 7.2 percent annual rate, as output increased 4.2 percent and hours worked by all persons engaged in the sector fell 2.7 percent (tables A and 1). In the first quarter of 2003, productivity increased 2.7 percent, as output rose 1.4 percent and hours declined 1.2 percent.

Hourly compensation in the business sector increased 4.3 percent in the second quarter of 2003 after increasing 4.8 percent 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 3.7 percent in the second quarter of 2003, after rising 0.9 percent in the first quarter.

Changes in unit labor costs reflect changes in both hourly compensation and productivity. Unit labor costs decreased 2.7 percent in the second quarter of 2003, after increasing 2.0 percent in the first quarter (seasonally adjusted annual rates). The implicit price deflator for the business sector rose 0.8 percent in the second quarter, as a 6.6 percent increase in unit nonlabor payments was partially offset by a decline in unit labor costs.

Nonfarm business

Productivity in the nonfarm business sector grew at a 6.8 percent annual rate in the second quarter of 2003, as output grew 4.4 percent and hours of all persons fell 2.3 percent (table A). In the first quarter of 2003, output per hour in the nonfarm business sector increased 2.1 percent, as output rose 1.4 percent and hours declined 0.7 percent (table 2).

Hourly compensation rose 3.8 percent in the second quarter of 2003, following a 4.1 percent advance in the first quarter. When the rise in consumer prices was taken into account, real hourly compensation increased 3.2 percent in the second quarter of 2003. This was the largest gain in real hourly compensation since the third quarter of 2000, when it grew 5.0 percent.

Unit labor costs decreased 2.8 percent in the second quarter of 2003. This measure increased 2.0 percent in the first quarter. Unit nonlabor payments grew 6.3 percent, and the implicit price deflator for nonfarm business output rose 0.6 percent in the second quarter of 2003 (seasonally adjusted annual rates).

Manufacturing

In the second quarter of 2003, productivity increased 3.7 percent in manufacturing, as output declined 2.4 percent and hours of all persons fell 5.9 percent (seasonally adjusted annual rates). In the durable goods sector, productivity grew 3.5 percent in the second quarter of 2003, as output fell 3.3 percent and hours dropped by 6.5 percent. In nondurable goods, output per hour rose 3.4 percent, as output decreased 1.7 percent and hours dropped 4.9 percent (tables 3, 4, and 5).

The hourly compensation of all manufacturing workers increased 5.2 percent during the second quarter of 2003, reflecting a 4.9-percent rise in hourly compensation in durable goods industries and a 5.9-percent increase in the nondurable goods sector. Real hourly compensation in the total manufacturing sector advanced 4.6 percent in the second quarter, after increasing 2.4 percent one quarter earlier.

Unit labor costs in manufacturing rose 1.5 percent in the second quarter of 2003, compared with a 2.2 percent increase in the first quarter. Unit labor costs rose 1.4 percent in durable goods and 2.4 percent in nondurable goods in the second quarter of 2003.

Nonfinancial corporations

Preliminary second-quarter 2003 measures of productivity and costs also were reported today for nonfinancial corporations (tables B and 6). Productivity increased 8.1 percent during the second quarter, as output increased 5.9 percent and hours declined 2.0 percent (seasonally adjusted annual rates). In the first quarter of 2003, output per hour increased 4.3 percent, as output rose 2.8 percent and hours of all employees fell 1.5 percent. 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 3.9 percent in the second quarter of 2003, following a 5.2 percent gain in the first quarter. When the rise in consumer prices is taken into account, real hourly compensation increased 3.3 percent in the second quarter and 1.3 percent in the first quarter of 2003 (table 6).

Unit labor costs for nonfinancial corporations decreased 3.8 percent in the second quarter of 2003, compared with a 0.9-percent increase in the first quarter of the year. Unit profits grew at a 55.5 percent annual rate in the second quarter of 2003, after rising 7.6 percent in the first quarter. The implicit price deflator for nonfinancial corporate output declined 0.7 percent in the second quarter of 2003.

Revised Measures

Current and previous measures for the second quarter of 2003 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. Ratios of hours worked to hours paid for the second quarter of 2003, derived from the National Compensation Survey, were incorporated into the current measures.

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 due to the combination of a larger decline in output and a smaller decline in hours. Because productivity was revised down more than hourly compensation, unit labor costs in manufacturing rose more than reported on Aug. 7.

Corrected Measures

In the Productivity and Costs news release of August 7, 2003, data for manufacturing, durable manufacturing, nondurable manufacturing, and nonfinancial corporations for the fourth quarter in 2002, the annual average for 2002, and the first quarter in 2003 were incorrect. Previously published and corrected data are displayed in table D for the manufacturing sector and in table E for the nonfinancial corporate sector. Tables 3-6 contain the correct data for all four sectors.

First quarter 2003

Fourth quarter 2002

Annual average 2002

First quarter 2003

Fourth quarter 2002

Annual average 2002

Upcoming changes

Historical measures of output and compensation for all sectors, along with the conversion of the manufacturing and nonfinancial corporate sectors from the 1987 Standard Industrial Classification (SIC) to the 2002 North American Industry Classification System (NAICS), will be prepared following the release of the revised national income and product accounts in December. On Jan. 7, 2004, the BLS will post revised productivity and cost measures through the fourth quarter of 2002 on its web site. More specific information will be announced later this year.