2009 First Quarter (Preliminary) 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 2009, Preliminary

The Bureau of Labor Statistics of the U.S. Department of Labor today reported preliminary productivity data--as measured by output per hour of all persons--for the first quarter of 2009. The seasonally adjusted annual rates of productivity growth in the first quarter were:

1.1 percent in the business sector and 0.8 percent in the nonfarm business sector.

Productivity gains in both sectors were due to hours declining faster than output. First quarter measures are summarized in table A and appear in detail in tables 1 through 5.

In manufacturing, productivity changes in the first quarter were:

-3.4 percent in manufacturing, -10.0 percent in durable goods manufacturing, and -0.1 percent in nondurable goods manufacturing.

Manufacturing sector productivity fell for the fourth consecutive quarter. First quarter declines in output and hours in total manufacturing were the largest in these series, which begin with data for the second quarter of 1987; output dropped 22.4 percent and hours fell 19.7 percent (seasonally adjusted annual rates). Output and hours in manufacturing, which includes about 11 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 independently prepared by the Board of Governors of the Federal Reserve System. See Technical Notes for further information on data sources.

Business

Productivity in the business sector rose 1.1 percent in the first quarter of 2009, as output decreased 7.8 percent and hours of all persons at work in the sector--employees, proprietors, and unpaid family workers--fell 8.8 percent (seasonally adjusted annual rates). The decrease in hours was the largest since a decline of 12.1 percent in the first quarter of 1975. When measured from the first quarter of 2008 to the first quarter of 2009, output per hour increased 1.9 percent (tables A and 1). This growth rate is lower than the 2.5 percent average annual rate from 2000 to 2007.

Hourly compensation increased 4.1 percent during the first quarter of 2009. Hourly compensation includes wage and salary accruals, supplements, employer contributions to employee benefit plans, and taxes. Real hourly compensation, which takes into account changes in consumer prices, increased 6.6 percent in the first quarter of 2009.

Unit labor costs in the business sector rose 2.9 percent in the first quarter of 2009. Growth in unit labor costs is roughly equal to the change in hourly compensation minus the change in output per hour. Compared to the same quarter a year ago, unit labor costs increased 2.2 percent, more than the 1.4 percent average annual growth that occurred from 2000 to 2007. The implicit price deflator for the business sector, which reflects changes in both unit labor costs and unit nonlabor payments, grew at a 2.4 percent rate in the first quarter.

Nonfarm Business

Productivity in the nonfarm business sector increased 0.8 percent in the first quarter of 2009, as output declined 8.2 percent and hours of all persons dropped 9.0 percent (seasonally adjusted annual rates). The decrease in hours, 9.0 percent, was the largest since the first quarter of 1975, when hours fell 12.0 percent. Over the last four quarters, productivity in the nonfarm business sector grew 1.8 percent (tables A and 2). This was lower than the 2.5 percent average rate of growth from 2000 to 2007.

Hourly compensation in the nonfarm business sector grew at a 4.1 percent annual rate in the first quarter of 2009. Real hourly compensation increased 6.6 percent--due to a 2.3 percent decline in consumer prices (seasonally adjusted annual rates).

Unit labor costs grew 3.3 percent in the first quarter of 2009 and the implicit price deflator for nonfarm business increased 2.9 percent. Over the last four quarters, unit labor costs rose 2.4 percent, greater than the 1.4 percent average annual growth rate from 2000 to 2007.

Manufacturing

Productivity decreased 3.4 percent in the manufacturing sector during the first quarter of 2009, as output dropped 22.4 percent and hours fell 19.7 percent (seasonally adjusted annual rates). These were the largest-ever declines in the output and hours series, which begin with data for the second quarter of 1987. Over the last four quarters total manufacturing productivity decreased 3.3 percent. By contrast, output per hour increased at a 3.7 percent average annual rate during the 2000-2007 period.

In the durable goods manufacturing subsector, output plummeted at a 31.0 percent annual rate while hours dropped 23.4 percent, yielding a productivity decline of 10.0 percent. In the nondurable goods producing industries productivity edged down 0.1 percent as a 13.1 percent decline in output was offset by a 13.0 percent decline in hours worked.

The hourly compensation of all manufacturing workers increased 12.8 percent during the first quarter of 2009 and real hourly compensation rose 15.5 percent (seasonally adjusted annual rates). Unit labor costs increased 16.7 percent in the first quarter of 2009, the largest increase in this series since the first quarter of 2000 when this measure increased at the same 16.7 percent rate. From the first quarter of 2008 to the first quarter of 2009, unit labor costs rose 11.5 percent. This was a considerable increase compared to the average annual rate of growth of 0.3 percent from 2000 to 2007.

Fourth quarter and annual measures for nonfinancial corporations

Fourth quarter and annual 2008 measures of productivity and costs were announced for the nonfinancial corporate sector (tables B, C, and 6). Output per employee hour fell 3.9 percent for the fourth quarter of 2008 as output and hours fell 10.5 percent and 6.9 percent, respectively. The productivity decline was the largest since the first quarter of 1993 when output per hour fell 5.0 percent.

Hourly compensation increased 5.4 percent in the fourth quarter of 2008. Real hourly compensation rose steeply, 15.0 percent, when the 8.4 percent decrease in consumer prices was taken into account. Unit labor costs increased 9.6 percent and unit profits fell 28.8 percent in the fourth quarter of 2008. Productivity for nonfinancial corporations increased 2.5 percent from the same quarter a year ago, slightly lower than the 2.7 percent annual growth rate from 2000 to 2007.

Hourly compen- sation 4.9 7.1 4.2 3.6 4.1 3.0 3.6 3.6 4.1 3.9

Real hourly compen- sation 2.8 3.6 1.4 1.9 1.8 0.3 0.3 0.3 1.2 0.1

Unit nonlabor costs 0.9 3.8 8.1 -1.6 0.2 -1.6 3.2 1.7 3.2 2.6

Total unit costs 1.1 3.3 3.9 -0.7 0.3 -0.9 1.5 1.8 3.3 1.5

Implicit price deflator 0.3 1.2 1.3 0.6 1.2 2.0 2.8 3.1 1.7 0.0

Revised measures

Output data for the manufacturing sectors were revised to reflect revised Indexes of Industrial Production, published by the Board of Governors of the Federal Reserve System on March 27, 2009. Appendix tables 1-3 display quarterly and annual data for manufacturing, durable manufacturing, and nondurable manufacturing beginning in 2004. Quarterly and annual historical data are available on the BLS website.

A revised seasonally adjusted Consumer Price Index Research Series, prepared by the BLS Office of Prices and Living Conditions for the period 1978 to 2008, has been incorporated into the consumer price series. As a result, measures of real hourly compensation for all sectors were revised back to 2004. Complete quarterly and annual series are available on the BLS website.

Previous and revised measures for the fourth quarter and annual average of 2008 in the business, nonfarm business, and manufacturing sectors are compared in table D. In the business and nonfarm business sectors, productivity was revised down slightly in the fourth quarter, due to downward revisions to output. Unit labor costs in these sectors grew at the same rate reported March 5. The 2008 annual average measures for the business and nonfarm business sectors were not revised.

Fourth quarter 2008

Annual average 2008

Manufacturing productivity growth was revised down for the fourth quarter as output was revised down by more than hours. Hourly compensation was not revised, but the downward revision in manufacturing productivity led to a slight upward revision to unit labor costs. For the year 2008, a downward revision to manufacturing output caused productivity to be revised down and unit labor costs to be revised up; hours and compensation were not revised.