2007 Second Quarter (Revised) Productivity and Costs

Historical release narrative reproduced from the official public-domain source. Statistical tables, standard technical appendices, administrative material and attendance rosters are omitted; formatting is adapted for reading. Figures retain the release's historical context and may have been revised. Consult the linked source for the complete document.

Second Quarter 2007, 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 second quarter of 2007. The seasonally adjusted annual rates of productivity change in the second quarter were:

3.5 percent in the business sector and 2.6 percent in the nonfarm business sector.

In both sectors, the second-quarter productivity gains were larger than the preliminary estimates reported on August 7. (See table C).

In manufacturing, the revised productivity changes in the second quarter were:

1.8 percent in manufacturing, 4.7 percent in durable goods manufacturing, and -1.4 percent in nondurable goods manufacturing.

Manufacturing productivity grew slightly faster in the second quarter of 2007 than was reported on Aug. 7, reflecting upward revisions to output per hour in nondurable manufacturing; durable manufacturing productivity was not revised. Output and hours in manufacturing, which includes about 12 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 differences between these measures and the preliminary second- quarter figures issued on Aug. 7 are shown 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 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 2007, productivity in the business sector grew 3.5 percent as output increased 4.6 percent and hours worked by all persons engaged in the sector--employees, proprietors, and unpaid family workers--rose 1.0 percent (tables A and 1). Productivity had increased 0.2 percent during the first quarter of 2007, as output increased 0.2 percent and hours were unchanged (seasonally adjusted annual rates).

Hourly compensation in the business sector grew at a 5.5 percent annual rate in the second quarter of 2007, the same rate of growth as one quarter earlier. 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 0.5 percent in the second quarter of 2007 after increasing 1.6 percent in the first quarter of the year.

Unit labor costs, which reflect changes in hourly compensation and productivity, rose 1.9 percent in the second quarter of 2007. Unit labor costs had increased 5.3 percent in the first quarter of 2007. From the second quarter of 2006 to the second quarter of 2007, these costs increased 5.1 percent--the largest four-quarter increase since unit labor costs increased 5.2 percent between the fourth quarter of 1989 and the fourth quarter of 1990. The implicit price deflator for business output, which exhibits changes in unit labor costs and unit nonlabor payments, rose 2.5 percent in the second quarter of 2007 and 4.1 percent in the first quarter.

Nonfarm business

Productivity in the nonfarm business sector grew at a 2.6 percent annual rate in the second quarter of 2007, reflecting increases of 5.0 percent in output and 2.3 percent in hours of all persons (tables A and 2). In the first quarter of 2007, productivity increased 0.7 percent, output rose 0.3 percent, and hours fell 0.3 percent.

Hourly compensation increased 4.1 percent in the second quarter of 2007, but when the 6.0 percent jump in consumer prices was taken into account, real hourly compensation fell 1.8 percent in the second quarter. As revised, hourly compensation increased 5.9 percent in the first quarter of 2007.

Unit labor costs rose 1.4 percent in the second quarter of 2007, following a 5.2-percent increase in the first quarter. Unit labor costs increased 4.9 percent from the second quarter of 2006 to the second quarter of 2007, more than during any four-quarter period since third-quarter 1999 to third-quarter 2000, when they increased 5.0 percent. The implicit price deflator for nonfarm business output increased 2.4 percent in the second quarter of 2007 and 3.6 percent one quarter earlier.

Manufacturing

Productivity increased 1.8 percent in manufacturing in the second quarter of 2007, as output grew 4.0 percent and hours of all persons increased 2.1 percent (seasonally adjusted annual rates). Productivity grew 4.7 percent in the durable goods sector, reflecting a 6.8-percent increase in output and 2.0-percent rise in hours. In nondurable goods, productivity fell 1.4 percent when output grew 0.8 percent but hours grew faster, 2.3 percent (tables 3, 4, and 5).

The hourly compensation of all manufacturing workers increased 3.4 percent during the second quarter of 2007, reflecting increases in hourly compensation of 1.7 percent in durable goods industries and 6.8 percent in the nondurable goods sector. Real hourly compensation in the total manufacturing sector fell 2.4 percent in the second quarter after consumer prices were taken into account. Revised results for the first quarter of 2007 show that hourly compensation had increased 8.9 percent and real hourly compensation had increased 4.8 percent in total manufacturing.

Unit labor costs in manufacturing increased 1.6 percent in the second quarter of 2007 following a revised first-quarter increase of 7.0 percent. Unit labor costs fell 2.8 percent in durable goods and rose 8.4 percent in nondurable goods in the second quarter.

Nonfinancial corporations

Preliminary second-quarter 2007 measures of productivity and costs were reported today for nonfinancial corporations (tables B and 6). Productivity increased 3.5 percent during the second quarter, reflecting 4.6-percent growth in output and a 1.0-percent rise in employee hours (seasonally adjusted annual rates). In the first quarter of 2007, output per hour rose 0.7 percent, output increased 0.9 percent, and employee hours rose 0.2 percent (as revised). Nonfinancial corporations include 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 rose 4.7 percent in the second quarter of 2007, following a 4.5 percent gain in the first quarter (as revised). When the rise in consumer prices is taken into account, real hourly compensation fell 1.2 percent in the second quarter after increasing 0.6 percent one quarter earlier. Unit labor costs for nonfinancial corporations increased 1.1 percent in the second quarter of 2007.

Unit profits increased 8.6 percent in second quarter 2007, following an 11.8-percent increase in the first quarter. The implicit price deflator for nonfinancial corporate output rose 1.5 percent in the second quarter.

Revised Measures

Current and previous measures for the second quarter of 2007 for the business, nonfarm business, and manufacturing sectors are compared in table C. The quarterly movements differ from those reported on Aug. 7 based on information then available. In the business sector, productivity was revised up in the second quarter as output was revised up and hours increased slightly less than previously reported. In the nonfarm business sector, productivity also was revised up in the second quarter, as output was revised up while hours were unchanged. In both of these sectors, upward revisions to productivity were larger than those to hourly compensation, so unit labor costs were revised down in the second quarter. In the manufacturing sector, an upward revision to productivity in the second quarter resulted when output posted a larger upward revision than hours. An upward revision to manufacturing hourly compensation was larger than the revision to productivity, resulting in a faster rise in unit labor costs than was previously reported.

Second quarter 2007

First quarter 2007

Hourly compensation growth in the first quarter also was revised to reflect new estimates of compensation. In all of the major sectors, hourly compensation grew faster in the first quarter than was reported on Aug. 7. As a result, unit labor costs in these sectors increased more than in preliminary estimates.

Revised Measures: Nonfinancial Corporations

Data for the first quarter of 2007 were revised for the nonfinancial corporate sector. Productivity was revised up along with output; hours were not revised. Hourly compensation was revised up more than productivity, causing unit labor costs to increase 3.8 percent rather than 3.6 percent, as reported on August 7.

First quarter 2007