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

1.5 percent in the business sector and 2.5 percent in the nonfarm business sector.

In both sectors, increases in productivity were smaller than reported on Aug. 10, as output was revised down and hours were revised up. (See table C.)

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

6.9 percent in manufacturing, 4.9 percent in durable goods manufacturing, and 9.7 percent in nondurable goods manufacturing.

In total manufacturing, the change in productivity was revised down from a preliminary estimate of 7.5 percent. 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; the differences between these measures and the preliminary second-quarter figures issued on Aug. 10 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.

c=corrected

Business

From the first quarter to the second quarter of 2004, productivity in the business sector grew at a 1.5 percent annual rate, as output increased 3.2 percent and hours worked by all persons engaged in the sector rose 1.6 percent (tables A and 1). The productivity increase marks a deceleration from the increases posted during the four quarters of 2003 and the first quarter of 2004; it is the smallest increase since a 1.2-percent rise was posted in the fourth quarter of 2002 (seasonally adjusted annual rates).

Hourly compensation in the business sector increased 3.7 percent in the second quarter of 2004, a faster rise than the 2.8 percent increase one quarter earlier (as revised). 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, fell 1.0 percent in the second quarter of 2004, after falling 0.8 percent in the first quarter of the year. The second-quarter decline was the largest since real hourly compensation fell 1.6 percent in the second quarter of 2000.

Unit labor costs rose 2.1 percent in the second quarter of 2004, after dropping 1.1 percent in the first quarter. The second-quarter rise was the fastest since the first quarter of 2001, when unit labor costs rose 7.4 percent. The implicit price deflator for the business sector rose 3.3 percent in the second quarter, up from a 2.1-percent rise in the first quarter. The second-quarter increase also was the fastest in recent years; the last comparable increase in the implicit price deflator occurred when it rose 3.4 percent in the first quarter of 2000.

Nonfarm business

Productivity in the nonfarm business sector grew at a 2.5 percent annual rate in the second quarter of 2004, as output grew 3.5 percent and hours of all persons increased 1.0 percent (table A). In the first quarter of 2004, output per hour in the nonfarm business sector had risen 3.7 percent, as output and hours rose 5.7 and 2.0 percent, respectively (table 2). As in the larger business sector, the second-quarter increase in labor productivity was the smallest since the fourth quarter of 2002.

Hourly compensation rose 4.3 percent in the second quarter of 2004, following a 2.0 percent advance in the first quarter. When the rise in consumer prices was taken into account, real hourly compensation declined by 0.4 percent in the second quarter of 2004.

Unit labor costs increased 1.8 percent in the second quarter of 2004; they had fallen 1.6 percent in the first quarter. The implicit price deflator for nonfarm business output rose 2.9 percent in the second quarter of 2004 and 2.0 percent one quarter earlier. The second quarter increase was the biggest since the first quarter of 2000, when it rose 3.3 percent (seasonally adjusted annual rates).

Manufacturing

In the second quarter of 2004, productivity increased 6.9 percent in manufacturing, as output grew 6.2 percent and hours of all persons fell 0.6 percent (seasonally adjusted annual rates). In the durable goods sector, productivity grew 4.9 percent in the second quarter of 2004, reflecting an increase in output of 5.9 percent and growth in hours of 1.0 percent. In nondurable goods, output per hour rose 9.7 percent, reflecting an output increase of 6.3 percent and a 3.1 percent drop in hours at work (tables 3, 4, and 5). The 9.7-percent increase in nondurable goods manufacturing productivity was the largest reported since a 12.6 percent rise in the fourth quarter of 1999.

The hourly compensation of all manufacturing workers increased 3.2 percent during the second quarter of 2004, reflecting a 2.3-percent rise in hourly compensation in durable goods industries and a 4.4-percent increase in the nondurable goods sector. Real hourly compensation in the total manufacturing sector fell 1.5 percent in the second quarter, after decreasing 7.4 percent one quarter earlier.

Unit labor costs in manufacturing dropped 3.5 percent in the second quarter of 2004, less than the 6.6 percent decline in the first quarter. Unit labor costs fell 2.5 percent in durable goods and 4.8 percent in nondurable goods in the second quarter of 2004.

Nonfinancial corporations

Preliminary second quarter 2004 measures of productivity and costs were reported today for nonfinancial corporations (tables B and 6). Productivity increased 1.4 percent during the second quarter, as output increased 3.2 percent and hours grew 1.8 percent (seasonally adjusted annual rates). In the first quarter of 2004, output per hour rose 0.1 percent (as revised), reflecting increases of 2.9 percent in output and 2.8 percent in hours of all employees. Nonfinancial corporations include all corporations doing business in the United States except those classified as offices in the finance and insurance sector, offices of bank holding companies, or offices of other holding companies.

Hourly compensation rose 4.0 percent in the second quarter of 2004, following a 2.3 percent gain in the first quarter. When the rise in consumer prices is taken into account, real hourly compensation fell in both the first and second quarters of 2004, 0.7 percent in the second quarter and 1.3 percent one quarter earlier.

Unit labor costs for nonfinancial corporations rose 2.6 percent in the second quarter of 2004 and 2.1 percent in the first quarter, following declines in seven of the previous eight quarters. Unit profits grew at a 16.6 percent annual rate in the second quarter of 2004, similar to the 16.9- percent growth in the first quarter. The implicit price deflator for nonfinancial corporate output grew 3.7 percent in the second quarter of 2004.

Revised Measures

Current and previous measures for the second quarter of 2004 for the business, nonfarm business, and manufacturing sectors are compared in table C. The quarterly movements differ from those reported on Aug. 10 based on information then available. In the business and nonfarm business sectors, productivity and hourly compensation were revised down; unit labor costs also grew less than reported last month. In the manufacturing sector, productivity and hourly compensation were revised down, and unit labor costs declined more than reported last month.

Second quarter 2004

First quarter 2004

c=corrected

Hourly compensation growth in the first quarter also was revised to reflect revised estimates of compensation. In the business and nonfarm business sectors, hourly compensation grew much more slowly in the first quarter than reported on Aug. 10. As a result, unit labor costs in these sectors now show declines in the first quarter of 1.1 and 1.6 percent, respectively. In the manufacturing sector, revised data show that hourly compensation fell 4.1 percent in the first quarter, and unit labor costs dropped 6.6 percent.

Measures of hours for all of the major sectors were revised on Aug. 10, 2004, 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 shortly 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.

Revised Measures: Nonfinancial Corporations

Data for the first quarter of 2004 were revised for the nonfinancial corporate sector. Productivity, output, hourly compensation, and unit labor costs grew more slowly than reported on Aug. 10.

First quarter 2004

c=corrected

Upcoming changes

Late in 2004 or early in 2005, BLS will improve the way it uses data for farm workers, the nonfarm self employed, and nonfarm unpaid family workers 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.