2008 First 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.

First Quarter 2008, 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 first quarter of 2008. The revised seasonally adjusted annual rates of productivity change in the first quarter were:

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

In both sectors, the first-quarter productivity gains were greater than the preliminary estimates reported on May 7, due primarily to upward revisions to output growth.

In manufacturing, the revised productivity changes in the first quarter were: 3.6 percent in manufacturing, 2.6 percent in durable goods manufacturing, and 5.7 percent in nondurable goods manufacturing.

Manufacturing productivity growth was slower in the first quarter of 2008 than reported on May 7 as output was revised down by more than hours. 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. First-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 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 2.4 percent in the first quarter of 2008 as output increased 0.6 percent and hours worked by all persons-- employees, proprietors, and unpaid family workers--declined 1.7 percent (seasonally adjusted annual rates). When the first quarter of 2008 is compared with the first quarter of 2007, output per hour in the business sector increased 3.4 percent--the largest four-quarter gain since a 3.4 percent increase from the second quarter of 2003 to the second quarter of 2004 (see tables A and 1).

Hourly compensation increased at a 4.8 percent annual rate in the first quarter of 2008. 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, rose 0.4 percent in the first quarter of 2008 following a 0.6 percent gain in the previous quarter.

The change in unit labor costs approximates the change in hourly compensation less the change in productivity. In the first quarter of 2008 these costs grew at a 2.3 percent annual rate, but from the first quarter of 2007 to the first quarter of 2008 unit labor costs rose just 0.7 percent. The implicit price deflator for business output, which reflects changes in both unit labor costs and unit nonlabor payments, grew 2.0 percent in the first quarter of 2008.

Nonfarm business

During the first quarter of 2008, productivity rose 2.6 percent in the nonfarm business sector; output increased 0.7 percent and hours of all persons fell 1.8 percent (seasonally-adjusted annual rates). From the first quarter of 2007 to the first quarter of 2008, output per hour in the nonfarm business sector increased 3.3 percent, the largest four-quarter change since a 3.8 percent increase from the second quarter of 2003 to the second quarter of 2004. Nonfarm business productivity had increased at an average annual rate of 2.7 percent from 2000 through 2006.

Hourly compensation increased 4.9 percent in the nonfarm business sector in the first quarter of 2008. The measure increased 6.6 percent in the fourth quarter, as revised. When hourly compensation is adjusted for the rise in consumer prices, real hourly compensation grew 1.5 percent in the fourth quarter of 2007 and 0.6 percent in the first quarter of 2008.

Unit labor costs rose 2.2 percent in the first quarter of 2008. As in the business sector, the percent change from the same quarter a year ago was 0.7 percent. The implicit price deflator for nonfarm business output increased by 2.3 percent in the first quarter of 2008.

Manufacturing

Productivity grew at a 3.6 percent annual rate in the manufacturing sector during the first quarter of 2008, reflecting a 1.2 percent decrease in output and a 4.7 percent decrease in hours (table A). This was the largest decline in hours since a 6.3 percent drop in the third quarter of 2003. Output per hour rose at the highest rate in three years, 5.7 percent, in nondurable goods industries during the first quarter; hours fell by 6.9 percent and output declined 1.6 percent (tables 3, 4, and 5). Total manufacturing productivity grew 4.0 percent from the first quarter of 2007 to the first quarter of 2008, similar to the 3.8 percent average annual increase from 2000 to 2006.

Hourly compensation in manufacturing grew 7.9 percent during the first quarter of 2008. Real hourly compensation, which takes into account changes in consumer prices, increased 3.5 percent for all manufacturing workers, as a 3.1 percent rise in durable manufacturing real hourly compensation combined with a 4.0 percent rise in the nondurable goods industries.

Unit labor costs rose 4.2 percent in manufacturing during the first quarter of 2008, as hourly compensation increased faster than productivity in both subsectors. However, over the past four quarters total manufacturing unit labor costs edged down 0.2 percent, as durable goods unit labor costs declined 1.8 percent and nondurable goods unit labor costs rose 1.6 percent.

Nonfinancial corporations

Preliminary first-quarter 2008 measures of productivity and costs for nonfinancial corporations also were announced today (tables B and 6). Productivity rose 4.6 percent in the first quarter as output rose 3.2 percent and employee-hours declined 1.4 percent (seasonally adjusted annual rates). From the first quarter of 2007 to the first quarter of 2008 productivity grew 3.0 percent; it had grown 2.6 percent per year from 2000 to 2006. 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 increased 5.9 percent during the first quarter of 2008, the same as the revised fourth quarter 2007 increase. Taking the 4.3 percent rise in consumer prices into account, real hourly compensation increased 1.5 percent in the first quarter of 2008, more than the 0.8 percent increase one quarter earlier. Unit labor costs in nonfinancial corporations rose 1.2 percent in the first quarter of 2008, and 1.1 percent over the last four quarters.

REVISED MEASURES

Previous and revised measures for the first quarter of 2008 in the business, nonfarm business, and manufacturing sectors are compared in table C.

First quarter 2008

Fourth quarter 2007

Annual average 2007

In the business and nonfarm business sectors, productivity was revised up along with output, as hours were little changed. Upward revisions to hourly compensation offset those to productivity, leaving the increase in unit labor costs about the same as reported May 7.

In the manufacturing sector, productivity growth was revised down in the first quarter as output was revised down by more than hours. The downward revision to total manufacturing productivity combined with an upward revision to hourly compensation to revise the increase in unit labor costs from 2.5 percent to 4.2 percent.

REVISED MEASURES: NONFINANCIAL CORPORATIONS

Fourth quarter and annual average 2007 measures were revised for the nonfinancial corporate sector. As revised, productivity increased at a 2.4 percent annual rate in the fourth quarter of 2007, reflecting similar growth in output and unchanged employee-hours. An upward revision to hourly compensation outpaced the revision to productivity, and as a result unit labor costs rose slightly faster than reported May 7. For the year 2007, productivity was revised up slightly due solely to an upward revision to output.

Fourth quarter 2007

Annual average 2007