2009 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 2009, 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 2009. The revised seasonally adjusted annual rates of productivity change in the first quarter were:

1.8 percent in the business sector and 1.6 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 solely to revisions to output growth.

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

-2.7 percent in manufacturing, -10.4 percent in durable goods manufacturing, and 1.9 percent in nondurable goods manufacturing.

Manufacturing productivity in the first quarter of 2009 fell at a slower rate than was reported on May 7. 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 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 1.8 percent in the first quarter of 2009 as output decreased 7.2 percent and hours worked by all persons--employees, proprietors, and unpaid family workers- -decreased 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. From the first quarter of 2008 to the first quarter of 2009, productivity has increased 2.0 percent, with output and hours falling 3.8 percent and 5.7 percent, respectively (tables A and 1). This productivity growth rate was lower than the 2.5 percent average annual rate from 2000 to 2007.

Hourly compensation increased at a 4.5 percent annual rate in the first quarter of 2009. 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 7.0 percent in the first quarter of 2009.

The change in unit labor costs approximates the change in hourly compensation less the change in productivity. In the first quarter of 2009 these costs grew at a 2.7 percent annual rate, higher than the 2.0 percent rate from the first quarter of 2008 to the first quarter of 2009 and the 1.4 percent average annual rate from 2000 to 2007. The implicit price deflator for business output, which reflects changes in both unit labor costs and unit nonlabor payments, grew 2.2 percent in the first quarter of 2009.

Nonfarm Business

During the first quarter of 2009, productivity rose 1.6 percent in the nonfarm business sector; output fell 7.6 percent and hours of all persons fell 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 1.9 percent (tables A and 2). This growth rate was lower than the 2.5 percent average rate of growth from 2000 to 2007.

Hourly compensation increased at a 4.6 percent annual rate in the nonfarm business sector in the first quarter of 2009. The measure increased 4.5 percent in the fourth quarter, as revised. When hourly compensation is adjusted for the fall in consumer prices, real hourly compensation grew 7.1 percent in the first quarter of 2009.

Unit labor costs rose 3.0 percent in the first quarter of 2009. The percent change from the same quarter a year ago was 2.2 percent. The implicit price deflator for nonfarm business output increased 2.8 percent in the first quarter of 2009.

Manufacturing

Productivity decreased at a 2.7 percent annual rate in the manufacturing sector during the first quarter of 2009, reflecting a 21.7 percent decrease in output and a 19.5 percent decrease in hours (tables A and 3). 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, manufacturing productivity fell 3.2 percent, the largest four-quarter decline in the series (tables A and 3). This contrasts with the 3.7 percent average annual increase from 2000 to 2007. In the durable goods manufacturing subsector, output declined 31.0 percent and hours fell 23.0 percent, yielding a productivity decline of 10.4 percent. In nondurable goods industries, productivity rose 1.9 percent as the decline in output of 11.6 percent was less than the 13.2 percent decline in hours.

Hourly compensation in manufacturing grew 13.4 percent during the first quarter of 2009, reflecting a 15.8 percent rise in durable goods industries and a 10.1 percent rise in the nondurable goods industries (seasonally-adjusted annual rates). Real hourly compensation, which takes into account changes in consumer prices, increased 16.1 percent for all manufacturing workers.

Unit labor costs rose 16.6 percent in manufacturing during the first quarter of 2009, after increasing 17.1 percent in the fourth quarter of 2008. Over the last four quarters total manufacturing unit labor costs increased 12.0 percent, the largest increase in the series.

Nonfinancial Corporations

Preliminary first-quarter 2009 measures of productivity and costs for nonfinancial corporations also were announced today (tables B and 6). Productivity decreased 2.1 percent in the first quarter as output fell 12.3 percent and hours fell 10.4 percent (seasonally adjusted annual rates). The decline in output was the largest in the series, which begins in the second quarter of 1958. The hours decline was the largest since a 13.9 percent decline in the first quarter of 1975. From the first quarter of 2008 to the first quarter of 2009 productivity grew 2.0 percent; it had grown at a 2.7 percent annual rate from 2000 to 2007. 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 6.3 percent during the first quarter of 2009; real hourly compensation increased 8.8 percent, after accounting for the decline in prices. Unit labor costs in nonfinancial corporations rose 8.5 percent in the first quarter of 2009, and 3.0 percent over the last four quarters.

Revised Measures

Previous and revised measures for the first quarter of 2009 in the business, nonfarm business, and manufacturing sectors are compared in table C. In the business, nonfarm business, and manufacturing sectors productivity was revised up along with output; hours were also revised up slightly in the manufacturing sector. Upward revisions to hourly compensation were less than the revisions to productivity, so unit labor costs increased less than was reported on May 7 for each of the three sectors.

Revised Measures Nonfinancial Corporations

Fourth quarter and annual average 2008 measures were revised for the nonfinancial corporate sector. As revised, productivity decreased at a 4.3 percent annual rate in the fourth quarter of 2008, reflecting a 0.4 percentage point downward revision to output and unchanged employee hours. A downward revision to hourly compensation was larger than the downward revision to productivity; as a result, unit labor costs rose slightly less than reported on May 7. Annual measures were virtually the same as the preliminary estimates.

Fourth quarter 2008

Annual average 2008