2009 Third 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.

Third Quarter 2009, Preliminary

Nonfarm business sector labor productivity increased at a 9.5 percent annual rate during the third quarter of 2009, the U.S. Bureau of Labor Statistics reported today. This was the largest gain in productivity since the third quarter of 2003, when it rose 9.7 percent. Labor productivity, or output per hour, is calculated by dividing an index of real output by an index of hours of all persons, including employees, proprietors, and unpaid family workers. Output increased 4.0 percent and hours worked decreased 5.0 percent in the third quarter of 2009 (All quarterly percent changes in this release are seasonally adjusted annual rates).

From the third quarter of 2008 to the third quarter of 2009, nonfarm business output fell 3.5 percent and hours worked fell faster, 7.5 percent, resulting in a productivity increase of 4.3 percent (tables A and 2). The four-quarter decline in hours was the largest in the series, which begins in 1948. Nonfarm business productivity rose 1.8 percent in 2008, and 2.6 percent per year on average during the 2001-2007 period corresponding to the last complete business cycle.

Unit labor costs in nonfarm businesses fell 5.2 percent in the third quarter of 2009; the increase in productivity outpaced the increase in hourly compensation. Unit labor costs declined 3.6 percent over the last four quarters--the largest decrease since the series began in 1948 (tables A and 2). BLS defines unit labor costs as the ratio of hourly compensation to labor productivity; increases in hourly compensation tend to increase unit labor costs and increases in output per hour tend to reduce them.

Productivity increased 9.8 percent in the business sector in the third quarter of 2009. This was the largest increase in the series since the second quarter of 1972. Unit labor costs decreased 5.1 percent during the third quarter of 2009 (tables A and 1).

Manufacturing sector productivity grew 13.6 percent in the third quarter of 2009, as output increased 7.7 percent despite a 5.2 percent decrease in hours worked. This was the largest increase in the quarterly productivity series, which begins in 1987. Over the last four quarters, manufacturing productivity increased 3.1 percent as output and hours declined 10.8 percent and 13.5 percent respectively (tables A and 3). Manufacturing sector productivity increased 0.8 percent in 2008, and at an average annual rate of 4.0 percent from 2001 to 2007.

In the third quarter of 2009, changes in productivity, output, and hours were larger in durable goods producing industries than in nondurable goods industries (tables A, 4 and 5).

Manufacturing unit labor costs fell at a 7.1 percent annual rate in the third quarter of 2009, but increased 2.3 percent over the last four quarters (tables A and 3).

The data sources and methods used in the preparation of the manufacturing output series differ from those used in preparing the business and nonfarm business output series, and these measures are not directly comparable. See Technical Notes for further information on data sources.

Revised measures

In the second quarter of 2009, nonfarm business productivity growth was revised up to 6.9 percent, reflecting declines in output and hours of 1.1 percent and 7.5 percent, respectively. Unit labor costs were revised down due to the upward revision in productivity. In the manufacturing sector, revised second quarter productivity growth was 6.8 percent, a 1.9 percentage point upward revision. Manufacturing unit labor costs declined 1.6 percent, rather than rising 0.2 percent as reported September 2.

In the nonfinancial corporate sector, revised data for the second quarter of 2009 show that productivity increased 6.6 percent, as output per hour was revised up along with output; hours were unrevised. After revision, unit labor costs fell 4.5 percent in the second quarter, but rose 1.4 percent from the second quarter of 2008 to the second quarter of 2009. Unit profits grew at a 23.0 percent annual rate in the second quarter of 2009.

Sector Nonfarm Durable Nondurable Business Business Manufacturing Manufacturing Manufacturing Q to Q Y to Y Q to Q Y to Y Q to Q Y to Y Q to Q Y to Y Q to Q Y to Y

Sector Nonfarm Durable Nondurable Business Business Manufacturing Manufacturing Manufacturing Revised Previous Revised Previous Revised Previous Revised Previous Revised Previous

Percent change, annual rate

Percent change, annual rate