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Second Quarter 2006, Preliminary
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 2006. The preliminary seasonally adjusted annual rates of productivity change in the second quarter were:
1.1 percent in the business sector and 1.1 percent in the nonfarm business sector.
These rates of growth are lower than those in the previous quarter. As revised, productivity increased 4.5 percent in the business sector and 4.3 percent in the nonfarm business sector in the first quarter of 2006.
In manufacturing, the preliminary productivity changes in the second quarter were:
3.0 percent in manufacturing, 3.8 percent in durable goods manufacturing, and 2.6 percent in nondurable goods manufacturing.
Manufacturing productivity grew 3.0 percent in the second quarter as output increased 5.4 percent and hours increased 2.3 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.
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 28. The data also incorporate revised estimates of output in manufacturing and hours in all sectors. See Revised Measures.
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 first quarter to the second quarter of 2006, business sector output per hour increased at a 1.1-percent annual rate. Output increased 2.6 percent and hours of all persons engaged in the sector rose 1.5 percent (seasonally adjusted annual rates). As revised, labor productivity grew 4.5 percent in the first quarter of 2006, as output increased 6.7 percent and hours increased 2.1 percent (tables 1 and B).
Hourly compensation increased 5.1 percent in the second quarter of 2006, less than the 6.9 percent gain in the first quarter (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, edged up 0.2 percent during the second quarter of 2006, after increasing 4.7 percent during the first quarter.
Unit labor costs, which reflect changes in both hourly compensation and productivity, increased 4.0 percent during the second quarter of 2006 after rising 2.3 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 3.1 percent in the second quarter and 2.7 percent in the first quarter.
Nonfarm Business
Productivity increased 1.1 percent in the nonfarm business sector during the second quarter of 2006, as output increased 2.5 percent and hours of all persons rose 1.4 percent (seasonally adjusted annual rates). Output per hour grew at a 4.3 percent annual rate in the first quarter of 2006, as output grew 6.7 percent and hours increased 2.3 percent (tables 2 and B).
Hourly compensation in the nonfarm business sector increased 5.4 percent in the second quarter of 2006, less than the 6.9-percent rise one quarter earlier. When the rise in consumer prices is taken into account, real hourly compensation rose 0.4 percent in the second quarter of 2006 after increasing 4.7 percent in the first quarter.
Unit labor costs increased 4.2 percent in the second quarter, and 2.5 percent in the first quarter, of 2006. The implicit price deflator for nonfarm business output grew 3.4 percent in the second quarter, following a 2.9-percent increase in the previous quarter.
Manufacturing
Productivity increased 3.0 percent in manufacturing, as output grew 5.4 percent and hours of all persons increased 2.3 percent (seasonally adjusted annual rates). In the first quarter of 2006, productivity rose 3.7 percent, reflecting a 5.8-percent increase in output and a 2.0-percent rise in hours. In durable goods manufacturing, productivity rose 3.8 percent in the second quarter as output grew 7.8 percent and hours of all persons increased 3.9 percent. In nondurable goods industries, second-quarter productivity increased 2.6 percent as output rose 2.2 percent and hours fell 0.4 percent (tables 3, 4, and 5).
Hourly compensation of all manufacturing workers rose 1.7 percent during the second quarter, reflecting similar growth in both manufacturing subsectors. When the increase in consumer prices is taken into account, the real hourly compensation of all manufacturing workers fell 3.1 percent in the second quarter, after increasing 3.0 percent one quarter earlier.
Unit labor costs in manufacturing declined 1.2 percent in the second quarter of 2006, reflecting decreases of 2.1 percent in durable goods industries and 1.0 percent in nondurable goods industries.
Revised Measures
Revised and previous measures for the first quarter of 2006 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 1, while hours movements were revised down. In the manufacturing sector, productivity, output, and hours were all revised downward slightly. In all three sectors, hourly compensation increases were revised up for the first quarter of 2006. Unit labor costs were revised up in the business and nonfarm business sectors and also rose in manufacturing rather than falling as reported June 1.
Hours data underlying the major sector measures were also revised, due to incorporation of information on employment by legal form of organization from the 2002 Economic Census. The proportion of employment in tax-exempt establishments is used to estimate the number of employees of non-profit institutions. Hours worked by these employees are excluded from hours measures for the business sectors.
Output and productivity growth in the business and nonfarm business sectors were revised downward in each year from 2003 to 2005. For 2004 and 2005, hourly compensation was revised down more than productivity in these sectors; increases in unit labor costs were smaller than shown in the June 1 release. In 2003, hourly compensation was not revised and the downward revisions to productivity led to increases in unit labor costs.
Annual average 2003
Output data for the manufacturing sector also were revised. Annual output indexes are constructed by BLS using data from the Bureau of the Census and the Bureau of Economic Analysis (BEA), both in the U.S. Department of Commerce, and BLS surveys. Output measures now incorporate information from the 2004 Annual Survey of Manufactures. Data for the 1998-2002 period also incorporate revisions to information from the 2002 Economic Census for manufacturing. The BLS is now calculating intrasectoral transactions, subtracted to avoid double-counting, using BEA's 1997 input-output (I-O) table which was constructed using data collected on the North American Industry Classifications System (NAICS). Earlier estimates of intrasectoral transactions were estimated using I-O tables based on the Standard Industrial Classification (SIC) system. Revisions due to intrasectoral transactions affect all years of output data. Revised annual data appear in appendix tables 7 through 9.
In the manufacturing sector, growth in output and productivity were revised down in both 2004 and 2005. Because hourly compensation was revised down more than productivity in 2005, the increase in unit labor costs was also revised downward. In 2004, a large downward revision to productivity eclipsed the downward revision in hourly compensation, and unit labor costs edged up 0.1 percent rather than falling 3.1 percent as reported June 1. In 2003, an upward revision in productivity combined with a downward revision in hourly compensation to yield a much smaller increase in unit labor costs than previously reported. For the entire 1987 to 2005 period for which manufacturing data are available, the average annual rate of productivity growth was unchanged at 3.7 percent per year. The revisions did lead to changes in recent periods; productivity growth from 1995 to 2000 was revised up from 4.1 percent per year to 4.7 percent per year, while the average rate of growth from 2000 to 2005 was revised down from 5.0 percent to 4.1 percent.
Revised Measures: Nonfinancial Corporations
Productivity and cost measures for the first quarter of 2006 for nonfinancial corporations also were revised to incorporate more recent information than was available in the June 1 release (table D). Increases in productivity and output were revised up to 7.2 percent and 9.0 percent, respectively, and the first quarter increase in employee hours was revised down to 1.7 percent (seasonally adjusted annual rates). Hourly compensation was revised up by less than productivity, and unit labor costs were revised to show a decline of 0.8 percent rather than the 1.3-percent increase reported June 1. Unit profits in the first quarter were revised up from 13.1 percent to 42.9 percent.
First quarter 2006
Annual average 2005
Annual average 2004
Annual average 2003
Historical data for nonfinancial corporations also were revised due to incorporation of revised data on output and compensation from the national income and product accounts. In addition, information from the 2002 Economic Census on employment in corporations led to revisions of hours worked in the nonfinancial corporate sector.
For the year 2005, output and output per hour were revised down by 1.0 percent. Hourly compensation was revised down by a similar amount, and unit labor costs rose at the same 0.4 percent rate reported previously. In 2004, the downward revision to hourly compensation was larger than that to productivity, and unit labor costs declined, rather than remaining unchanged, as reported June 1. And in 2003, a downward revision to productivity growth resulted in unit labor costs rising 0.4 percent, rather than falling. Revised data for nonfinancial corporations appear in table 6 and appendix table 6.
Source: U.S. Bureau of Labor Statistics · Original release Aug 8, 2006.
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