2004 Second 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.

Second Quarter 2004

The Bureau of Labor Statistics of the U.S. Department of Labor reported preliminary productivity data--as measured by output per hour of all persons- -for the second quarter of 2004. The preliminary seasonally adjusted annual rates of productivity change in the second quarter were:

1.9 percent in the business sector and 2.9 percent in the nonfarm business sector.

Productivity growth in the business sector reflected increases of 3.5 percent in output and 1.5 percent in hours. Output per hour increased more in the nonfarm business sector because output grew more, 3.8 percent, and hours rose less, 0.8 percent, than in the business sector.

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

7.5 percent in manufacturing, 5.7 percent in durable goods manufacturing, and 10.7 percent in nondurable goods manufacturing.

Manufacturing productivity grew 7.5 percent in the second quarter as output increased 6.6 percent and hours declined 0.9 percent (seasonally adjusted annual rates). 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. Second-quarter measures are summarized in table A and appear in detail in tables 1 through 5.

Data in this release reflect the regular multi-year GDP revisions released by the Bureau of Economic Analysis of the U.S. Department of Commerce on July 30. They also incorporate new estimates of average weekly hours at work for nonproduction and supervisory workers, along with new information on seasonal patterns for farm workers, nonfarm proprietors and unpaid family workers, and employees of government enterprises. See Revised Measures.

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 quarter to the second quarter of 2004, business sector output per hour increased at a 1.9-percent annual rate. Output increased 3.5 percent and hours of all persons engaged in the sector increased 1.5 percent (seasonally adjusted annual rates). As revised, labor productivity grew 3.9 percent in the first quarter of 2004, as output and hours increased 5.3 percent and 1.3 percent, respectively (table 1).

Hourly compensation increased 4.2 percent in the second quarter, less than the 4.8 percent gain in the first quarter of 2004 (seasonally adjusted annual rates). 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, declined 0.5 percent during the second quarter of 2004, after rising 1.1 percent during the first quarter.

Unit labor costs, which reflect changes in both hourly compensation and productivity, increased 2.2 percent during the second quarter of 2004 after rising 0.8 percent in the previous quarter. The implicit price deflator for the business sector, which reflects changes in both unit labor costs and unit nonlabor payments, increased 3.2 percent in the second quarter and 2.1 percent in the first quarter of 2004.

Nonfarm Business

Productivity increased 2.9 percent in the nonfarm business sector during the second quarter of 2004, as output increased 3.8 percent and hours of all persons rose 0.8 percent (seasonally adjusted annual rates). Output per hour grew at a 3.7 percent annual rate in the first quarter of 2004, as output increased 5.7 percent and hours increased 2.0 percent (table 2).

Hourly compensation in the nonfarm business sector increased 4.9 percent in the second quarter of 2004, up from the 4.0-percent rise one quarter earlier. When the rise in consumer prices is taken into account, real hourly compensation rose 0.1 percent in the second quarter of 2004 and 0.3 percent in the first quarter.

Unit labor costs increased 1.9 percent in the second quarter of 2004, after rising 0.3 percent during the first quarter. The implicit price deflator for nonfarm business output grew 2.8 percent in the second quarter, following a 2.0-percent increase in the previous quarter.

Manufacturing

Productivity increased 7.5 percent in manufacturing, as output grew 6.6 percent and hours of all persons declined 0.9 percent (seasonally adjusted annual rates). In the previous quarter, productivity rose 2.8 percent, reflecting increases in output and hours of 6.2 and 3.3 percent, respectively. In durable goods, productivity rose 5.7 percent in the second quarter as output grew 6.4 percent and hours of all persons rose 0.7 percent. In nondurable goods, second-quarter productivity increased by 10.7 percent, output increased 6.9 percent, and hours fell 3.5 percent (tables 3, 4, and 5). The productivity gain in nondurable goods industries was the largest since the fourth quarter of 1999, when output per hour increased 12.6 percent.

Hourly compensation of all manufacturing workers rose 5.2 percent during the second quarter, reflecting growth of 4.7 percent in durable goods industries and 5.9 percent in the nondurable manufacturing sector. When the increase in consumer prices is taken into account, the real hourly compensation of all manufacturing workers increased by 0.5 percent in the second quarter, after rising 1.2 percent one quarter earlier.

Unit labor costs in manufacturing fell 2.2 percent in the second quarter of 2004, reflecting declines of 1.0 percent in durable goods industries and 4.4 percent in nondurable goods industries.

Revised Measures

Current and previous measures for the first quarter of 2004 for the business, nonfarm business, and manufacturing sectors are compared in table B. In each of these sectors, productivity was revised downward from the preliminary numbers reported on June 3, as both output and hours were revised up--hours more than output. Hourly compensation and unit labor costs grew less in all three sectors than reported on June 3, based on information then available.

First quarter 2004

Output data for the business and nonfarm business sectors and the compensation series for all sectors incorporate the revisions of the national income and product accounts produced by the Bureau of Economic Analysis, U.S. Department of Commerce. These revisions affected data beginning with the first quarter of 2001. Table C presents previous and revised measures for major sectors for the years 2001 to 2003. The largest revisions were to hourly compensation and, therefore, to real hourly compensation and unit labor costs for the years 2002 and 2003.

Measures of hours for all of the major sectors have been revised to incorporate new estimates of average weekly hours at work for supervisory and nonproduction workers. Ratios of the average weekly hours at work for these employees relative to those of nonsupervisory and production workers were developed from data in the Current Population Survey. These ratios were applied to average weekly hours at work for nonsupervisory and production workers developed from data in the Current Employment Statistics and Employment Cost Index programs.

An article discussing these new measures and the effects of this change was published in the April 2004 issue of the Monthly Labor Review. A link to a technical note describing the methodology will be posted later this summer on the BLS labor productivity home page (www.bls.gov/lpc/). Copies of the technical note also will be available by calling 202-691-5604, sending an email to dprweb@bls.gov, or writing to the Bureau of Labor Statistics, Division of Major Sector Productivity, Room 2150, Washington DC 20212.

New information on seasonal patterns is reflected in measures of employment and hours of farm workers, the nonfarm self-employed, and nonfarm unpaid family workers and in hours of employees in government enterprises, beginning in 1999. Concurrent seasonal adjustment will now be used when measuring employment and hours of these workers. Late in 2004 or early in 2005, BLS also intends to improve the way it uses these series in the productivity program, adjusting them to account for the effects of multiple jobholding. Further information on this change will be announced later this year.

Appendix tables 1-6 present quarterly and annual data for all sectors for 1999-2001.

Revised Measures: Nonfinancial Corporations

Productivity and cost measures for the first quarter of 2004 for nonfinancial corporations also were revised to incorporate more recent information than was available in the June 3 release (table D). Productivity growth was revised down, reflecting both a downward revision to output and a larger increase in employee hours. The 2.7 increase in hours was the largest since the third quarter of 1999, when hours increased 3.1 percent. Hourly compensation growth was revised down one percentage point, like productivity, so the increase in unit labor costs was unchanged. Unit profits were revised up significantly.

Productivity and cost measures for the fourth quarter of 2003 also were revised to incorporate more recent information on output, hours, and employee compensation. Fourth quarter 2003 productivity was revised up, reflecting an upward revision to output. The revision to productivity was larger than the upward revision in hourly compensation, resulting in a larger decline in unit labor costs than originally reported.

Quarterly percent changes at seasonally adjusted annual rates

First quarter 2004

Fourth quarter 2003