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Third Quarter 2005, 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 2005. The seasonally adjusted annual rates of productivity growth in the third quarter were:
5.4 percent in the business sector and 4.7 percent in the nonfarm business sector.
In both sectors, changes in productivity are higher than the preliminary estimates published November 3, reflecting upward revisions to output. Movements in hours were unchanged in both sectors.
In manufacturing, revised productivity increases in the third quarter were:
3.4 percent in manufacturing, 6.5 percent in durable goods manufacturing, and 0.2 percent in nondurable goods manufacturing.
Productivity grew more slowly in the manufacturing sector than was reported on Nov. 3. The third-quarter change in manufacturing output was revised down and the decrease in hours was less than reported 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. 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 2005, business sector productivity rose at an annual rate of 5.4 percent, as output increased 5.0 percent and hours of all persons engaged in the sector dropped slightly, 0.4 percent (table 1). Output per hour had increased 0.8 percent in the second quarter.
Hourly compensation in the business sector increased 4.2 percent during the third quarter of 2005, following a decline of 0.1 percent 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, fell 0.8 percent in the third quarter and 4.0 percent in the second quarter.
Unit labor costs fell 1.1 percent in the third quarter of 2005 following a decline of 0.9 percent one quarter earlier. The implicit price deflator for the business sector, which reflects changes both in unit labor costs and in unit nonlabor payments, rose 2.8 percent in the third quarter of 2005.
Nonfarm business
Output per hour of all persons in the nonfarm business sector increased 4.7 percent during the third quarter of 2005, reflecting increases in output and hours of 4.8 percent and 0.1 percent, respectively (table 2). In the previous quarter, productivity in nonfarm businesses had risen 2.1 percent as output grew 4.4 percent and hours increased 2.2 percent.
Hourly compensation grew 3.7 percent in the third quarter of 2005, following the 0.9-percent rise in the second quarter (as revised). When the rise in consumer prices is taken into account, real hourly compensation declined 1.4 percent in the third quarter of 2005 and 3.1 percent one quarter earlier.
Unit labor costs fell 1.0 percent in the third quarter, similar to the previous quarter, when they dropped 1.2 percent. The implicit price deflator for nonfarm business increased 3.1 percent in the third quarter of 2005.
Manufacturing
Productivity increased 3.4 percent in manufacturing in the third quarter of 2005, as output increased 2.4 percent and hours of all persons decreased 1.0 percent (seasonally adjusted annual rates). Productivity growth in manufacturing grew more slowly than in the second quarter of the year, when it rose 4.0 percent (as revised). In the second quarter of 2005, output rose 1.2 percent and hours of all persons dropped 2.6 percent. In durable goods industries, productivity increased 6.5 percent in the third quarter, reflecting increases of 6.9 percent in output and 0.3 percent in hours. Productivity grew more slowly in the nondurable goods industries, 0.2 percent, as output declined 3.1 percent and hours fell 3.3 percent (tables 3, 4, and 5). Hours in nondurable goods manufacturing have fallen in every quarter beginning with the third quarter of 1999.
The hourly compensation of all manufacturing workers rose 3.1 percent in the third quarter of 2005. In durable goods manufacturing, hourly compensation increased 2.6 percent and in nondurable goods manufacturing it grew 3.8 percent. When the increase in consumer prices is taken into account, real hourly compensation for all manufacturing workers fell 1.9 percent in the third quarter.
Unit labor costs in manufacturing declined 0.3 percent in the third quarter of 2005 and 0.2 percent in the previous quarter. In durable goods manufacturing, unit labor costs declined 3.6 percent in the third quarter while unit labor costs in nondurable goods manufacturing rose 3.6 percent.
Nonfinancial Corporations
Third-quarter 2005 measures of productivity and costs also were released for nonfinancial corporations (tables B and 6). Output per all-employee hour grew at a 3.2 percent annual rate, more slowly than the 4.3 percent increase in the previous quarter (as revised). Output increased 4.0 percent in the third quarter, and hours of all employees rose 0.8 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 4.5 percent in the third quarter, up from the second quarter increase of 0.8 percent. When the rise in consumer prices is taken into account, real hourly compensation fell 0.6 percent in the third quarter.
Unit labor costs for the sector rose 1.3 percent in third quarter 2005 after falling 3.4 percent one quarter earlier. Unit nonlabor costs rose 5.5 percent, while unit profits dropped at a 2.9 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 1.7 percent.
Revised Measures
Current and previous measures for the second and third quarters of 2005 for the business, nonfarm business, and manufacturing sectors are compared in table C. In the third quarter, productivity in the business and nonfarm business sectors was revised up 0.6 percentage point, reflecting similar upward revisions in the output measures. Unit labor costs in the business and nonfarm business sectors showed the same 0.5 percentage-point downward revision in the third quarter, reflecting the higher productivity figures. In manufacturing, a downward revision to output combined with an upward revision to hours to dampen the third-quarter productivity change to 3.4 percent. Hourly compensation in manufacturing was revised up slightly. The combination of a downward revision to productivity and an upward revision to hourly compensation made the decline in unit labor costs, 0.3 percent, much shallower than the 1.6-percent drop reported on Nov. 3.
The second-quarter 2005 measures of hourly compensation, real hourly compensation, and unit labor costs were revised to reflect new information on compensation. In the business sector, hourly compensation now shows a slight decline in the second quarter of 0.1 percent, down substantially from the 3.0 percent increase previously reported. Unit labor costs were revised down by a similar amount and now reflect a 0.9 percent drop rather than a 2.2-percent increase. The downward revisions to hourly compensation and unit labor costs in nonfarm businesses were similar to those of the larger sector. In the second quarter of 2005, hourly compensation in nonfarm businesses rose 0.9 percent (revised down from 4.0 percent) and unit labor costs fell 1.2 percent (revised down from a 1.8-percent increase).
In manufacturing, hourly compensation also rose more slowly, 3.8 percent, than reported on Nov. 3. Real hourly compensation dropped 0.4 percent rather than rising, after revision. Manufacturing output and productivity also were revised to incorporate historical revisions and new seasonal factors in the Index of Industrial Production (IIP) released on November 7. (http://www.federalreserve.gov/releases/G17/revisions/current/g17rev.pdf) As a result of these revisions, productivity in the second quarter of 2005 rose more rapidly, 4.0 percent, than previously reported. As a result of the upward revision to productivity and a downward revision to hourly compensation, manufacturing unit labor costs, which had been reported as rising at a 4.2 percent annual rate, actually fell slightly, 0.2 percent. Appendix tables 1-3 show revised quarterly manufacturing measures for 2000- 2002. In the manufacturing sector, annual indexes for 1987-2001 are unchanged. Quarterly measures for all years may have been affected by the historical revisions and rebasing of the IIP.
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 2005 (table D). With hours unchanged, productivity was revised down along with output. Hourly compensation also was revised down, from 3.7 to 0.8 percent. Since hourly compensation was revised down more than productivity, unit labor costs show more of a decline, 3.4 percent, than previously reported on Nov. 3.
Source: U.S. Bureau of Labor Statistics · Original release Dec 6, 2005.
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