2014 Second 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.

Second Quarter 2014, Preliminary

Nonfarm business sector labor productivity increased at a 2.5 percent annual rate during the second quarter of 2014, the U.S. Bureau of Labor Statistics reported today, as hours increased 2.7 percent and output increased 5.2 percent. (All quarterly percent changes in this release are seasonally adjusted annual rates.) From the second quarter of 2013 to the second quarter of 2014, productivity increased 1.2 percent as output and hours worked rose 3.2 percent and 2.0 percent, respectively. (See table A.)

Labor productivity, or output per hour, is calculated by dividing an index of real output by an index of hours worked of all persons, including employees, proprietors, and unpaid family workers.

Historical Revisions to Productivity and Costs Data

Data in this release reflect the comprehensive revision to the National Income and Product Accounts (NIPA) released by the Bureau of Economic Analysis of the U.S. Department of Commerce on July 30, 2014. See Revised measures section.

Unit labor costs in nonfarm businesses increased 0.6 percent in the second quarter of 2014, as the 3.1 percent increase in hourly compensation was larger than the increase in productivity. Unit labor costs increased 1.9 percent over the last four quarters. (See 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.

Manufacturing sector productivity increased 3.6 percent in the second quarter of 2014, as output increased 7.0 percent and hours worked increased 3.2 percent. Productivity increased 2.9 percent in the durable goods sector and increased 5.9 percent in the nondurable goods sector. Over the last four quarters, manufacturing productivity increased 2.1 percent, as output increased 3.7 percent and hours increased 1.5 percent. Unit labor costs in manufacturing decreased 1.3 percent in the second quarter of 2014 and increased 0.8 percent from the same quarter a year ago. (See tables A and 3.)

The concepts, sources, and methods used for the manufacturing output series differ from those used in the business and nonfarm business output series; these output measures are not directly comparable. See Technical Notes for a more detailed explanation.

Revised measures

Output and related measures--including productivity and unit labor costs--in the business and nonfarm business sectors were subject to revision for the entire series going back to 1947. The most notable revisions in these series are generally limited to the period from 2010 onward. Hourly compensation and related measures for all sectors were subject to revision back to 2010. Measures of output for the business and nonfarm business sectors and measures of compensation for all sectors incorporate the revised National Income and Product Accounts (NIPA) data released on July 30 by the Bureau of Economic Analysis, U.S. Department of Commerce. Hours were revised for the business and nonfarm business sectors for 2010 forward to include revised NIPA data on government enterprises and to incorporate revised NIPA data on the proportion of sector compensation paid to employees of nonprofit institutions.

In the first quarter of 2014, nonfarm business productivity decreased 4.5 percent--rather than falling 3.2 percent as reported June 4--reflecting a downward revision to output which was larger than a small downward revision to hours. This decline in productivity was the largest since the fourth quarter of 1981, when productivity decreased 4.7 percent. Unit labor costs rose 11.8 percent in the first quarter of 2014--more than double the previously reported rate--due to both the downward revision to productivity and an upward revision to hourly compensation. Real hourly compensation increased 4.8 percent after revision, rather than the previous estimate of 0.4 percent. In the manufacturing sector, productivity growth in the first quarter was 3.2 percent, as output growth was revised down and hours were not revised. Unit labor costs increased 5.0 percent, rather than falling 0.4 percent as previously reported, due to both the downward revision to productivity and an upward revision to hourly compensation.

Annual Average productivity growth for 2013 in the nonfarm business sector was revised up to 0.9 percent from a previous estimate of 0.5 percent due to an upward revision to output. (See table C). Unit labor costs increased 0.2 percent, less than the 1.1 percent gain reported June 4. Productivity was revised down in both 2012 and 2011, to increases of 1.0 percent and 0.1 percent in those years, respectively. Growth in unit labor costs was revised up from 1.2 percent to 1.7 percent in 2012, and from 2.0 percent to 2.1 percent in 2011.

In the manufacturing sector, annual average productivity growth was not revised. Unit labor costs declined 1.6 percent in 2013, rather than 1.3 percent as previously reported. In 2012, unit labor costs fell 0.2 percent after revision, and in 2011 increased 0.8 percent rather than the previous estimate of 0.4 percent.

Nonfinancial corporate sector output and related measures were subject to revision for the entire series going back to 1947, and hourly compensation and related measures were revised back to 2010. First-quarter 2014 productivity growth was revised up to a decline of 0.9 percent; the revision was due solely to an upward revision to output. Annual average productivity in 2013 and 2012 grew more than previously reported--reflecting upward revisions to output in both years, and in 2011 a downward revision to productivity was due to a downward revision to output. (See tables D and 6.)

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, first quarter 2014

Percent change, annual rate, first quarter 2014

Percent change, annual average