2004 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 2004

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 2004. The revised seasonally adjusted annual rates of productivity change in the first quarter were:

4.6 percent in the business sector and 3.8 percent in the nonfarm business sector.

In both sectors, the first-quarter productivity gains were somewhat higher than those reported initially on May 6.

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

2.9 percent in manufacturing, 5.9 percent in durable goods manufacturing, and -0.7 percent in nondurable goods manufacturing.

Manufacturing productivity growth was revised down from the figure reported on May 6, reflecting a downward revision to productivity growth in nondurable goods manufacturing--which comprises less than forty percent of employment in the sector. Productivity in durable goods manufacturing was unchanged from the figure released last month. Output and hours in manufacturing, which includes about 13 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. 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 4.6 percent in the business sector (seasonally adjusted annual rate) from the fourth quarter of 2003 to the first quarter of 2004, as output increased 5.2 percent and hours worked by all persons grew 0.5 percent (table 1).

Hourly compensation increased 5.9 percent during the first quarter of 2004, up from 3.8 percent in the previous quarter, as revised. The first quarter increase was the largest in the sector since an 8.5-percent increase in the third quarter of 2000. 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, rose by 2.2 percent in the first quarter of 2004, down from a 3.0-percent rise in the previous quarter.

Unit labor costs rose 1.2 percent during the first quarter of 2004. In the fourth quarter of 2003, unit labor costs had risen 1.9 percent. The change in unit labor costs approximates the change in hourly compensation less the change in productivity. The implicit price deflator for business output, which reflects changes in both unit labor costs and unit nonlabor payments, grew by 2.2 percent in the first quarter of 2004.

Nonfarm business

Productivity rose 3.8 percent in the nonfarm business sector during the first quarter of 2004, reflecting a 5.4-percent rise in output and a 1.5- percent increase in working hours of all persons (table 2).

Hourly compensation increased 4.6 percent in the first quarter of 2004, slightly more rapidly than in the previous quarter when it grew by 4.2 percent. However, when the rise in consumer prices is taken into account, real hourly compensation in the first quarter, which rose 0.9 percent, grew more slowly than in the fourth quarter, when it increased by 3.4 percent.

Unit labor costs grew 0.8 percent during the first quarter of 2004, less than the 1.7-percent increase of the fourth quarter. The implicit price deflator for nonfarm business output rose by 2.1 percent in the first quarter of 2004.

Manufacturing

Productivity rose 2.9 percent in manufacturing in the first quarter of 2004, as output grew 5.8 percent and working hours of all persons increased 2.8 percent (seasonally adjusted annual rates). In durable goods industries, productivity grew 5.9 percent, as output expanded 9.3 percent and hours rose 3.2 percent. In nondurable goods industries, productivity fell 0.7 percent, as output grew 1.4 percent and hours grew faster, 2.1 percent (tables 3, 4, and 5).

Hourly compensation in manufacturing rose 6.2 percent during the first quarter. This increase reflects a rise of 5.5 percent in the hourly compensation of persons in durable goods industries and a larger increase, 7.3 percent, in the hourly compensation of workers in nondurable goods industries. Real hourly compensation, which takes account of changes in consumer prices, rose 2.5 percent for all manufacturing workers.

Unit labor costs rose 3.1 percent in manufacturing during the first quarter. In durable goods industries, rapid productivity growth enabled producers to more than offset the increase in hourly compensation and unit labor costs declined by 0.4 percent. In nondurable goods industries, however, where productivity dropped in the first quarter, unit labor costs rose substantially, 8.1 percent.

Nonfinancial corporations

Preliminary first-quarter 2004 measures of productivity and costs for nonfinancial corporations also were announced today (tables B and 6). Productivity rose 2.3 percent in the first quarter, less than the 4.3-percent rise (as revised) recorded in the fourth quarter of 2003. Output increased 4.5 percent in first quarter 2004, while employee-hours rose 2.1 percent (seasonally adjusted annual rates). The 2.1-percent increase in employee hours was the fastest one-quarter rise since a similar increase in the first quarter of 2000. 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 5.1 percent during the first quarter of 2004. When the rise in consumer prices is taken into account, real hourly compensation rose 1.4 percent in the first quarter. Unit labor costs in nonfinancial corporations rose 2.7 percent in the first quarter, after falling in eight of the previous nine quarters.

REVISED MEASURES

Current and previous measures for the first quarter of 2004 in the business, nonfarm business, and manufacturing sectors are compared in table C. In the business and nonfarm business sectors, both output and hours were revised up somewhat. Since output was revised up more than hours, productivity also is higher than reported on May 6, based on information available at that time. In the manufacturing sector, hours were revised up while output was not. As a result, productivity was revised down in the first quarter.

Hourly compensation was revised up in all sectors in the first quarter of 2004. In the business and nonfarm business sectors, unit labor costs were revised up less than hourly compensation since compensation costs were somewhat offset by the upward revisions to productivity. In manufacturing, where first quarter productivity was revised down, unit labor costs were revised up by more than the revision to hourly compensation.

The BLS also announced revised hourly compensation and unit labor costs for the fourth quarter and annual average of 2003. In the business and nonfarm business sectors, hourly compensation and unit labor costs grew more rapidly than announced on May 6. The revisions to fourth quarter hourly compensation were large enough to change movements in the annual averages for both sectors. In the year 2003, hourly compensation grew 0.1 percentage- point more--and unit labor costs dropped 0.1 percentage point less--than reported on May 6. In the manufacturing sector, fourth quarter hourly compensation was revised up sharply and now shows a rise of 6.8 percent for the quarter. Unit labor costs, which originally had shown a decline in the quarter, now show an increase of 2.0 percent. For the full year 2003, both hourly compensation and unit labor costs were revised up by 0.3 percentage point.

REVISED MEASURES: NONFINANCIAL CORPORATIONS

Fourth quarter and annual average 2003 measures also were revised for the nonfinancial corporate sector. In the fourth quarter of 2003, output and productivity were revised up by 1.0 percentage point; productivity rose 4.3 percent. Hourly compensation was revised up and unit labor costs now show a decline of 0.4 percent for the quarter. Annual average productivity and hourly compensation rose slightly faster than reported on May 6 while unit labor costs show less of a decline than originally reported.

Fourth quarter 2003

Annual average 2003