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Preliminary Second Quarter 2005
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 2005. The preliminary seasonally adjusted annual rates of productivity change in the second quarter were:
1.2 percent in the business sector and 2.2 percent in the nonfarm business sector.
Productivity growth in the business sector reflected increases of 4.2 percent in output and 3.0 percent in hours. Output per hour increased more in the nonfarm business sector because output grew more, 4.4 percent, and hours rose less, 2.1 percent, than in the business sector.
In manufacturing, the preliminary productivity changes in the second quarter were:
4.1 percent in manufacturing, 3.8 percent in durable goods manufacturing, and 5.0 percent in nondurable goods manufacturing.
Manufacturing productivity grew 4.1 percent in the second quarter as output increased 1.2 percent and hours declined 2.8 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.
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.
Data in this release reflect the regular multi-year revisions to the national income and product accounts released by the Bureau of Economic Analysis of the U.S. Department of Commerce on July 29. See Revised Measures.
Business
From the first quarter to the second quarter of 2005, business sector output per hour increased at a 1.2-percent annual rate. Output increased 4.2 percent and hours of all persons engaged in the sector increased 3.0 percent (seasonally adjusted annual rates). As revised, labor productivity grew 2.9 percent in the first quarter of 2005, as output and hours increased 4.4 percent and 1.4 percent, respectively (table 1).
Hourly compensation increased 2.5 percent in the second quarter, less than the 6.2 percent gain in the first quarter of 2005 (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 1.6 percent during the second quarter of 2005, after rising 3.7 percent during the first quarter.
Unit labor costs, which reflect changes in both hourly compensation and productivity, increased 1.4 percent during the second quarter of 2005 after rising 3.2 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 2.3 percent in the second quarter and 2.7 percent in the first quarter of 2005.
Nonfarm Business
Productivity increased 2.2 percent in the nonfarm business sector during the second quarter of 2005, as output increased 4.4 percent and hours of all persons rose 2.1 percent (seasonally adjusted annual rates). Output per hour grew at a 3.2 percent annual rate in the first quarter of 2005, as output increased 4.3 percent and hours increased 1.1 percent (table 2).
Hourly compensation in the nonfarm business sector increased 3.5 percent in the second quarter of 2005, less than the 6.9-percent rise one quarter earlier. When the rise in consumer prices is taken into account, real hourly compensation fell 0.6 percent in the second quarter of 2005 after increasing 4.5 percent in the first quarter.
Unit labor costs increased 1.3 percent in the second quarter of 2005, after rising 3.6 percent during the first quarter. The implicit price deflator for nonfarm business output grew 2.3 percent in the second quarter, following a 3.0-percent increase in the previous quarter.
Manufacturing
Productivity increased 4.1 percent in manufacturing, as output grew 1.2 percent and hours of all persons declined 2.8 percent (seasonally adjusted annual rates). Output increased less than in any quarter since the second quarter of 2003, when it fell 3.4 percent. In the first quarter of 2005, productivity rose 4.2 percent, reflecting a 3.5-percent increase in output and a decline of 0.7 percent in hours. In durable goods, productivity rose 3.8 percent in the second quarter as output grew 1.9 percent and hours of all persons fell 1.8 percent. In nondurable goods, second-quarter productivity increased by 5.0 percent as output edged up 0.1 percent and hours fell 4.6 percent (tables 3, 4, and 5). Hours worked in nondurable goods industries have fallen in 24 consecutive quarters, beginning with the third quarter of 1999.
Hourly compensation of all manufacturing workers rose 6.6 percent during the second quarter, reflecting growth of 6.3 percent in durable goods industries and 6.9 percent in the nondurable manufacturing sector. When the increase in consumer prices is taken into account, the real hourly compensation of all manufacturing workers rose 2.3 percent in the second quarter, after increasing 4.7 percent one quarter earlier.
Unit labor costs in manufacturing rose 2.3 percent in the second quarter of 2005, reflecting increases of 2.4 percent in durable goods industries and 1.8 percent in nondurable goods industries.
Revised Measures
Revised and previous measures for the first quarter of 2005 for the business, nonfarm business, and manufacturing sectors are compared in table B. In business and nonfarm business, output and productivity were revised upward from the numbers reported on June 2, while hours movements were unchanged. In the manufacturing sector, productivity was revised downward-- output was not revised and hours decreased less than previously reported. In all three sectors, hourly compensation increases were revised up for the first quarter of 2005. In the nonfarm business and manufacturing sectors, unit labor costs grew faster than reported June 2.
First quarter 2005
Output and productivity growth in the business and nonfarm business sectors were revised downward in each year from 2002 to 2004. For 2002, upward revisions to hourly compensation in these sectors combined with productivity revisions to produce smaller decreases in unit labor costs than shown in the June 2 release. Unit labor costs do not decline in 2003 after revision. For 2004, these costs increased more in the business and nonfarm business sectors than reported previously because productivity was revised down by more than hourly compensation.
Annual average 2004
Annual average 2003 Business:
In the manufacturing sector, there were revisions only to hourly compensation and, therefore, to real hourly compensation and unit labor costs. Hourly compensation growth was higher in 2002, and lower in 2003 and 2004, than previously reported. Manufacturing unit labor costs declined 0.3 percent in 2002, rose 3.0 percent in 2003, and fell 2.9 percent in 2004.
Revised Measures: Nonfinancial Corporations
Productivity and cost measures for the first quarter of 2005 for nonfinancial corporations also were revised to incorporate more recent information than was available in the June 2 release (table D). Increases in productivity and output were revised up, to 3.6 percent and 4.1 percent, respectively, as the first quarter increase in employee hours remained at 0.5 percent (seasonally adjusted annual rates). Hourly compensation was revised up by less than productivity, so the increase in unit labor costs was revised down, from 4.1 percent to 3.5 percent. Unit profits rose 6.2 percent, rather than falling 6.1 percent as reported June 2. For the year 2004, output per hour and hourly compensation were both revised down. Hourly compensation was revised down by more, resulting in a smaller increase in unit labor costs than previously reported.
First quarter 2005
Annual average 2004
Annual average 2003
Annual average 2002
Source: U.S. Bureau of Labor Statistics · Original release Aug 9, 2005.
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