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Third 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 third quarter of 2007. The seasonally adjusted annual rates of productivity growth in the third quarter were:
6.7 percent in the business sector and 6.3 percent in the nonfarm business sector.
In both sectors, changes in productivity are higher than the preliminary estimates published November 7, and represent the largest productivity gains since the third quarter of 2003. The upward revisions to productivity resulted from upward revisions to output--which grew 5.7 percent in both sectors--and small downward revisions to hours, which fell 1.0 percent in the business sector and 0.6 percent in the nonfarm business sector in the third quarter.
In manufacturing, revised productivity increases in the third quarter were:
5.0 percent in manufacturing, 6.1 percent in durable goods manufacturing, and 4.3 percent in nondurable goods manufacturing.
Productivity growth in the manufacturing sector was revised up, reflecting a small upward revision to output and a smaller downward revision to hours (table C). 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. 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
Business sector productivity grew at an annual rate of 6.7 percent during the third quarter of 2007, the largest gain since a 9.1 percent increase in the third quarter of 2003 (seasonally adjusted annual rates). Output rose 5.7 percent, the largest increase since a 10.4 percent rise in the third quarter of 2003. Hours of all persons engaged in the sector fell 1.0 percent, the first decline in the series since the second quarter of 2003, when hours fell 2.2 percent. When the third quarter of 2007 is compared to the third quarter of 2006, productivity rose 2.9 percent. This is the largest four-quarter increase since output per hour grew 3.4 percent from the second quarter of 2003 to the second quarter of 2004.
Hourly compensation in the business sector increased 4.7 percent during the third quarter of 2007. A downward revision reduced hourly compensation growth to 2.4 percent in the second quarter, lower than the 5.8 percent increase reported on November 7. From the third quarter of 2006 to the third quarter of 2007, hourly compensation increased 5.9 percent, the largest four-quarter gain since an increase of 6.7 percent from the fourth quarter of 1999 to the fourth quarter of 2000. Hourly compensation includes accrued wages and salaries, supplements, employer contributions to employee benefit plans, and taxes. Real hourly compensation, which takes into account changes in consumer prices, grew 2.7 percent in the third quarter and fell 3.3 percent in the second quarter.
Unit labor costs fell 2.0 percent in the third quarter of 2007, a larger decline than previously reported, reflecting the upward revision to productivity and the downward revision to hourly compensation. In the second quarter, unit labor costs declined 1.1 percent, in contrast to the 2.2 percent increase reported on Nov. 7. The implicit price deflator for the business sector, which reflects changes both in unit labor costs and in unit nonlabor payments, grew 0.2 percent in the third quarter of 2007.
Nonfarm business
Output per hour of all persons in the nonfarm business sector rose 6.3 percent during the third quarter of 2007, the largest gain since a 10.4 percent increase in the third quarter of 2003. Output increased 5.7 percent and hours of all persons engaged in the sector declined 0.6 percent, as revised. Hours growth was the lowest since the second quarter of 2003, when hours fell 1.3 percent. In the second quarter of 2007, productivity had increased 2.2 percent, reflecting gains of 4.2 percent in output and 2.0 percent in hours.
Hourly compensation in the nonfarm business sector rose 4.2 percent in the third quarter of 2007. After a downward revision, second-quarter hourly compensation increased 1.0 percent; lower than a 4.4 percent rise reported on November 7. From the third quarter of 2006 to the third quarter of 2007, hourly compensation increased 5.8 percent, the largest four-quarter gain since an increase of 6.5 percent from the fourth quarter of 1999 to the fourth quarter of 2000. When the rise in consumer prices is taken into account, real hourly compensation rose 2.3 percent in the third quarter of 2007 and fell 4.7 percent in the second quarter.
As in the business sector, nonfarm business unit labor costs decreased 2.0 percent in the third quarter of 2007 due to the upward revision to productivity and the downward revision to hourly compensation. Nonfarm business unit labor costs also declined 1.1 percent in the second quarter. The implicit price deflator for the nonfarm business sector, which reflects changes both in unit labor costs and in unit nonlabor payments, edged down 0.1 percent in the third quarter of 2007.
Manufacturing
Productivity increased 5.0 percent in manufacturing in the third quarter of 2007, as output increased 4.5 percent and hours of all persons decreased 0.5 percent (seasonally adjusted annual rates). When the third quarter of 2007 is compared with the third quarter of 2006, productivity increased 2.8 percent, less than during any four-quarter period since the period ending with the fourth quarter of 2004, when productivity also increased 2.8 percent. In durable goods industries, productivity increased 6.1 percent in the third quarter of 2007. Output grew 6.7 percent and hours rose 0.6 percent. Productivity grew more slowly in the nondurable goods industries, 4.3 percent, reflecting an increase of 1.9 percent in output and a decrease of 2.3 percent in hours (tables 3, 4, and 5).
The average hourly compensation of all manufacturing workers rose 1.5 percent in the third quarter of 2007. Hourly compensation was revised down substantially in the second quarter, from the 3.7 percent increase reported previously to a 1.4 percent decrease. In durable goods industries, hourly compensation increased 0.7 percent in the third quarter, compared with a 3.0 percent rise in nondurable goods manufacturing. When the increase in consumer prices is taken into account, real hourly compensation for all manufacturing workers declined 0.3 percent in the third quarter of 2007.
Unit labor costs in manufacturing fell 3.3 percent in the third quarter of 2007 and fell 3.7 percent in the second quarter, as revised. Unit labor costs declined 5.1 percent in durable goods industries and fell 1.3 percent in nondurable goods manufacturing during the third quarter.
Nonfinancial Corporations
Third-quarter 2007 measures of productivity and costs also were released for nonfinancial corporations (tables B and 6). Output per all-employee hour grew at a 4.2 percent annual rate. This was the largest increase since the third quarter of 2004 when productivity increased 5.2 percent. Output increased 4.7 percent in the third quarter of 2007, and hours of all employees rose 0.5 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 rose 4.4 percent in the third quarter. When consumer prices are taken into account, real hourly compensation rose 2.5 percent in the third quarter, a reversal from the 3.5 percent decrease in the second quarter, as revised.
In the nonfinancial corporate sector, unit labor costs increased 0.2 percent, unit nonlabor costs declined by 1.8 percent, and unit profits fell 10.1 percent in the third quarter of 2007 (seasonally adjusted annual rates). 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--fell 1.5 percent.
Revised Measures
Current and previous measures for the second and third quarters of 2007 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 higher than reported Nov. 7, due to 1.4 percentage point upward revisions to output and 0.1 percentage point downward revisions to hours. In manufacturing, productivity was also revised up--by 0.4 percentage point--due to a small upward revision to output and a small downward revision to hours. Hourly compensation was revised down in all three sectors, and the combination of faster productivity growth and slower hourly compensation growth led to downward revisions to unit labor costs in the third quarter.
Third quarter 2007
Second quarter 2007
The second-quarter 2007 measures of hourly compensation, real hourly compensation, and unit labor costs were revised to reflect new information on employee compensation reported by the Bureau of Economic Analysis of the U.S. Department of Commerce on Nov. 29. In both the business and nonfarm business sectors, hourly compensation growth was revised down by 3.4 percentage points. Because productivity was not revised, the hourly compensation revisions caused corresponding downward revisions to unit labor costs, which now decline rather than increase in the second quarter.
In the manufacturing sector, hourly compensation was revised down by 5.1 percentage points in the second quarter. As a result, manufacturing unit labor costs, which had been reported as rising at a 1.3 percent annual rate, actually fell 3.7 percent in the second quarter.
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 2007 (table D). Productivity was revised down along with output, as hours grew at the same rate reported Nov 7. Hourly compensation was revised down from a 4.9-percent gain to a 2.3-percent increase during the second quarter. Because hourly compensation was revised down more than productivity, the increase in unit labor costs was also revised down, from 1.1 percent to 0.2 percent.
Second quarter 2007
Source: U.S. Bureau of Labor Statistics · Original release Dec 5, 2007.
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