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Fourth Quarter and Annual Averages, 2005 Revised
The Bureau of Labor Statistics of the U.S. Department of Labor today reported revised fourth-quarter seasonally-adjusted annual rates of productivity change--as measured by output per hour of all persons--and revised changes for calendar year 2005. Percent changes in business and nonfarm business productivity were:
In the business sector, output per hour was unchanged from the third quarter to the fourth quarter of 2005, compared to the preliminary estimate of a 0.2 percent decline published February 2. In nonfarm businesses, productivity fell 0.5 percent, slightly less than the 0.6 percent decline reported previously (seasonally adjusted annual rates). Nonfarm business productivity last declined during the first quarter of 2001, when it fell 0.6 percent. On an annual average basis, productivity rose 2.7 percent in the business sector, 0.1 percentage point more than previously reported, and increased 2.9 percent in nonfarm businesses, compared to the preliminary estimate of 2.7 percent.
In the manufacturing sector, increases in productivity were:
Productivity in total manufacturing grew at a 4.7 percent annual rate in the fourth quarter of 2005, more than the 3.9 percent preliminary estimate, as a downward revision to fourth-quarter productivity growth in nondurable goods manufacturing partially offset an upward revision to output per hour in the durable goods subsector.
When revised annual averages for 2005 are compared to those for 2004, productivity increases were revised up in total manufacturing and nondurable manufacturing, while the 6.6 percent increase in durable manufacturing output per hour was the same as the preliminary estimate published February 2. 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. Fourth-quarter productivity and related measures are summarized in table A and appear in detail in tables 1 through 5. Preliminary and revised fourth-quarter and annual data appear 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 prepared by the Board of Governors of the Federal Reserve System. See Technical Notes for further information on data sources.
THIRD-TO-FOURTH QUARTER 2005 CHANGES
Business
Labor productivity in the business sector was unchanged in the fourth quarter of 2005, as output increased 1.8 percent and hours of all persons engaged in the sector increased 1.7 percent (table 1). Revised estimates show that output per hour increased 4.9 percent in the third quarter, as output increased 4.8 percent and hours declined 0.1 percent.
Hourly compensation grew at a 3.1-percent annual rate in the fourth quarter, compared with a 6.0-percent rise in the third quarter. This measure 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 0.1 percent in the fourth quarter of 2005 after increasing 0.9 percent one quarter earlier.
Unit labor costs, which reflect changes in hourly compensation and productivity, increased 3.1 percent during the fourth quarter of 2005, after rising 1.1 percent in the third quarter. The implicit price deflator for business output, which reflects changes in unit labor costs and unit nonlabor payments, increased 3.4 percent in the fourth quarter and 3.2 percent in the third quarter.
Nonfarm business
In the nonfarm business sector, productivity fell at an annual rate of 0.5 percent in the fourth quarter of 2005, as output rose 1.5 percent and hours of all persons--employees, proprietors, and unpaid family workers--grew 2.0 percent (seasonally adjusted annual rates). Nonfarm business productivity increased 4.2 percent in the third quarter of 2005, as output and hours grew 4.7 percent and 0.4 percent, respectively (table 2).
Hourly compensation rose 2.8 percent in the fourth quarter, after increasing 5.5 percent in the third quarter. When the increase in consumer prices was taken into account, real hourly compensation fell 0.4 percent in the fourth quarter and rose 0.3 percent in the third quarter.
Unit labor costs rose 3.3 percent in the fourth quarter after increasing 1.2 percent one quarter earlier. The implicit price deflator for nonfarm business increased 3.4 percent in the fourth quarter, and 3.5 percent in the third quarter, of 2005.
Manufacturing
Manufacturing productivity increased 4.7 percent in the fourth quarter of 2005, as output grew 9.3 percent and hours grew 4.4 percent (seasonally adjusted annual rates). The hours increase was the largest since the second quarter of 1996, when hours grew 6.3 percent. In durable goods industries, productivity increased 10.2 percent when output grew 15.3 percent and hours rose 4.6 percent. In nondurable goods industries, output per hour fell 2.0 percent, reflecting increases of 2.0 percent in output and 4.0 percent in hours. During the third quarter, productivity increased 3.7 percent in total manufacturing, 6.5 percent in durable goods manufacturing, and 0.7 percent in nondurable goods manufacturing (tables 3, 4, and 5).
Hourly compensation increased 1.8 percent during the fourth quarter in total manufacturing and in both subsectors. When the increase in consumer prices was taken into account, real hourly compensation fell 1.4 percent in the fourth quarter for workers in total, durable, and nondurable manufacturing.
Unit labor costs in manufacturing fell 2.8 percent in the fourth quarter of 2005, after increasing 1.8 percent in the third quarter. These costs declined 7.7 percent in durable goods industries and rose 3.9 percent in nondurable goods industries during the fourth quarter of 2005.
ANNUAL AVERAGE CHANGES, 2004-2005
Business
Business sector productivity increased 2.7 percent when the annual average for 2005 was compared with the annual average for 2004 (table B). Output increased 4.0 percent and hours of all persons engaged in the sector rose 1.3 percent. The 2.7-percent increase in 2005 followed a three-year period in which productivity growth increased rapidly, at an average of 3.9 percent per year, and is the same as the 2.7-percent productivity trend from 1995 to 2001.
Percent change from previous year
Hourly compensation in the business sector increased 5.4 percent in 2005 and 4.7 percent in 2004. Real hourly compensation increased 2.0 percent in each of the last two years.
Business sector unit labor costs increased 2.7 percent in 2005, more than in any calendar year since 2000, when these costs increased 4.0 percent. In 2004, unit labor costs rose 1.2 percent. The implicit price deflator rose 2.6 percent in 2005 and 2.4 percent in 2004.
Nonfarm business
Productivity increased 2.9 percent in the nonfarm business sector during 2005. Output grew 4.2 percent and hours of all persons increased 1.3 per cent. In 2004, productivity grew 3.4 percent, as output grew 4.8 percent and hours increased 1.3 percent. As in the more comprehensive business sector, nonfarm productivity grew at an above-average rate from 2001 to 2004, 3.8 percent. Productivity grew at an annual rate of 2.5 percent from 1995 to 2001.
Hourly compensation grew 5.5 percent in 2005. This was the largest increase in this measure since 2000 (7.1 percent), and followed a 4.6-percent increase in 2004. Real hourly compensation increased 2.1 percent in 2005 and 1.8 percent in 2004.
Unit labor costs in the nonfarm business sector rose 2.6 percent in 2005, after rising 1.1 percent in 2004. The 2005 increase in unit labor costs was the largest since 2000, when these costs increased 4.2 percent. The implicit price deflator, which reflects nonlabor payments as well as labor costs, increased 2.8 percent in 2005, following a 2.1-percent rise in 2004.
Manufacturing
Manufacturing productivity grew 5.0 percent in 2005, reflecting a 3.9- percent rise in output and a 1.1-percent decline in hours. In 2004, output per hour had increased 5.5 percent, as output grew 5.0 percent and hours declined 0.5 percent. Labor productivity increased 6.6 percent in durable goods manufacturing during 2005, as output grew 6.4 percent and hours declined 0.2 percent. In nondurable goods manufacturing, productivity rose 3.4 percent in 2005, as output rose 0.7 percent and hours fell 2.6 percent (tables B, 3, 4, and 5).
Hourly compensation of manufacturing workers increased 7.0 percent in 2005, compared to a 2.3-percent increase one year earlier. Hourly compensation increased 6.6 percent in durable goods industries and 7.6 percent in nondurable goods industries in 2005. Real hourly compensation in the manufacturing sector rose 3.5 percent in 2005 and fell 0.4 percent in 2004.
Unit labor costs rose 1.9 percent in manufacturing from 2004 to 2005. In durable manufacturing, annual average unit labor costs were unchanged from 2004 to 2005. Unit labor costs in nondurable manufacturing rose by 4.0 percent last year.
REVISED MEASURES
Productivity and cost data for the fourth quarter and full year 2005 for business, nonfarm business, and manufacturing were revised to incorporate the most recent information. Third-quarter 2005 measures of hourly compensation, real hourly compensation, and unit labor costs were revised to reflect new information on compensation from the National Income and Product Accounts (table C). Quarterly measures of real hourly compensation during 2005 also reflect the recalculation of seasonal factors for the Consumer Price Index for All Urban Consumers.
Quarterly and annual measures for all sectors were revised back to 2001 to incorporate the annual benchmark adjustment and updated information on seasonal trends from the BLS nonfarm payroll series (appendix tables 1-5). In addition, hours and related measures for the business and nonfarm business sectors were revised historically in order to fully incorporate Current Population Survey data on hours by job based on the most recent population weights available for all series. Full quarterly and annual historical series are available on the BLS website, http://www.bls.gov/data/home.htm, or by contacting the BLS Division of Major Sector Productivity.
In fourth-quarter 2005, business sector productivity was unchanged, rather than declining 0.2 percent, as reported in the preliminary estimate February 2 (seasonally adjusted annual rates). In the nonfarm business sector, productivity did fall, by 0.5 percent, slightly less than the 0.6 percent preliminary estimate. The upward revisions to business and nonfarm business productivity occurred as hours were revised up by less than output. Unit labor costs did not increase as much as in the preliminary estimate.
In the manufacturing sector, productivity and output were revised up, while hours were unchanged from the preliminary estimate. The upward revision to productivity, combined with a small downward revision in hourly compensation, lead to a revision in the change in unit labor costs from a decline of 1.9 percent to a decrease of 2.8 percent.
Measures of hourly compensation, real hourly compensation, and unit labor costs in all sectors were revised upwards substantially in the third quarter of 2005 after incorporation of revised compensation data.
When annual averages for 2005 are compared to those for 2004, productivity increased 2.7 percent in the business sector and 2.9 percent in the nonfarm business sectors, a little higher than previously reported. Small upward revisions to hourly compensation in both of these sectors led to larger increases in unit labor costs than previously reported. Manufacturing productivity growth was revised up as output rose more, and hours declined faster, than in the preliminary estimate. Because hourly compensation was revised up more than productivity, unit labor costs increased more than previously reported.
Revised measures: Nonfinancial corporations
Measures for the nonfinancial corporate sector also were revised due to updated information on hours worked by employees (appendix table 6). New information on output and compensation in the third quarter of 2005 also impacted measures for this sector (table 6).
Productivity in nonfinancial corporations in third-quarter 2005 increased more than in the preliminary estimates, as an upward revision to output was partially offset by an upward revision to hours worked. Hourly compensation was revised up by more than productivity, and unit labor costs increased more than published Feb. 2. Unit profits were revised down, posting a larger decline than originally reported.
Third quarter 2005
Source: U.S. Bureau of Labor Statistics · Original release Mar 7, 2006.
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