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Third Quarter 2004, revised
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 third quarter of 2004. The seasonally adjusted annual rates of productivity growth in the third quarter were:
2.4 percent in the business sector, and 1.8 percent in the nonfarm business sector.
In both sectors, changes in productivity are similar to the preliminary estimates published November 4. Output and hours were revised upwards in both sectors.
In manufacturing, revised productivity increases in the third quarter were:
4.6 percent in manufacturing, 4.8 percent in durable goods manufacturing, and 5.4 percent in nondurable goods manufacturing.
Productivity in the manufacturing sector rose more rapidly than was reported on Nov. 4. Both output and hours were revised up with the revisions to output larger than those to hours. 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. Third-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
From the second quarter to the third quarter of 2004, business sector productivity rose at an annual rate of 2.4 percent, as output increased 4.5 percent and hours of all persons engaged in the sector rose 2.0 percent (table 1). The hours increase was the largest since a 2.4-percent rise in the third quarter of 1999. Output per hour had increased 2.9 percent in the second quarter.
Business sector hourly compensation increased 4.0 percent during the third quarter of 2004, following a 5.2-percent increase in the second quarter (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, rose 2.1 percent in the third quarter of 2004.
Unit labor costs increased 1.5 percent in the third quarter of 2004, less than the 2.3-percent rise in the second quarter. The implicit price deflator for the business sector, which reflects changes both in unit labor costs and in unit nonlabor payments, rose at a 0.9 percent annual rate in the third quarter of 2004.
Nonfarm business
Output per hour of all persons in the nonfarm business sector rose 1.8 percent during the third quarter of 2004, as output grew 4.2 percent and hours of all persons increased 2.4 percent (table 2). Output had also increased 4.2 percent in the second quarter, but because hours rose less, 0.3 percent, nonfarm productivity increased more, 3.9 percent. The 2.4-percent increase in hours was the largest since the third quarter of 1999, when they increased 2.6 percent.
Hourly compensation grew 3.6 percent in the third quarter of 2004, less than the 5.9-percent increase in the previous quarter. When the rise in consumer prices is taken into account, real hourly compensation rose 1.8 percent in the third quarter of 2004.
Unit labor costs rose 1.8 percent in the third quarter, similar to the previous quarter, when they rose 1.9 percent. The implicit price deflator for nonfarm business increased 1.6 percent in the third quarter of 2004.
Manufacturing
Productivity increased 4.6 percent in manufacturing in the third quarter of 2004, as output increased 4.5 percent and hours of all persons edged down 0.1 percent (seasonally adjusted annual rates). In durable goods industries, productivity increased 4.8 percent, reflecting increases of 6.4 percent in output and 1.6 percent in hours. Productivity increased slightly more in the nondurable goods industries, 5.4 percent, as output rose 2.4 percent and hours fell 2.8 percent (tables 3, 4, and 5).
The hourly compensation of all manufacturing workers rose 4.6 percent during the third quarter of 2004. In durable goods manufacturing, hourly compensation increased 4.0 percent and in nondurable goods manufacturing it grew 5.4 percent. When the increase in consumer prices is taken into account, real hourly compensation for all manufacturing workers rose 2.7 percent in the third quarter.
Unit labor costs in manufacturing remained unchanged in the third quarter after falling 1.4 percent in the previous quarter. Unit labor costs declined 0.8 percent in durable goods manufacturing in the third quarter, and were unchanged in nondurable goods manufacturing.
Nonfinancial Corporations
Third-quarter 2004 measures of productivity and costs also were released for nonfinancial corporations (tables B and 6). Output per all-employee hour grew at a 4.2 percent annual rate, faster than the 3.3 percent increase in the previous quarter. Output increased 5.6 percent in the third quarter, and hours of all employees rose 1.3 percent (seasonally adjusted annual rates). 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 in nonfinancial corporations increased 4.0 percent in the third quarter, down from the second quarter increase of 5.5 percent. When the rise in consumer prices is taken into account, real hourly compensation increased 2.1 percent in the third quarter.
Unit labor costs for the sector declined 0.3 percent in third quarter 2004. Unit nonlabor costs rose 1.4 percent, while unit profits rose at a 0.9 percent annual rate in the third quarter. As a result of these movements, the implicit price deflator for the output of nonfinancial corporations-- which reflects a weighted average of these three measures--increased 0.3 percent.
Revised Measures
Current and previous measures for the second and third quarters of 2004 for the business, nonfarm business, and manufacturing sectors are compared in table C. In the third quarter, business sector productivity growth was revised up 0.1 percentage point when output was revised up more than hours. Conversely, productivity was revised down in the nonfarm business sector, as output was revised up less than hours. Unit labor costs in the business sector showed the same 1.5 percent increase in the third quarter as reported previously, while unit labor costs in nonfarm business rose slightly faster than reported on Nov. 4. In manufacturing, an upward revision to output raised the third-quarter gain in productivity to 4.6 percent. Because the revision to productivity was largely offset by an upward revision to hourly compensation, unit labor costs were revised only slightly, and now show no change from the previous quarter.
The second-quarter 2004 measures of hourly compensation, real hourly compensation, and unit labor costs were revised to reflect new information on compensation. In the business and nonfarm business sectors, hourly compensation and unit labor costs show larger increases than previously reported; real hourly compensation rose instead of fell in the business sector. In manufacturing, hourly compensation increased sharply in the second quarter, and real hourly compensation rose rather than fell, after revision. Manufacturing unit labor costs decreased less during the second quarter of 2004 than previously reported.
Revised measures: Nonfinancial corporations
Measures for the nonfinancial corporate sector also were revised to reflect updated information on output and employee compensation during the second quarter of 2004 (table D). With hours unchanged, productivity was revised upwards along with output. An upward revision to compensation implied larger increases in hourly compensation and real hourly compensation. Because the revision to compensation was greater than to output, unit labor costs increased more in the second quarter than previously reported.
Upcoming change
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 by accounting for the effects of multiple jobholding.
Source: U.S. Bureau of Labor Statistics · Original release Dec 7, 2004.
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