2014 Fourth 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.

Fourth Quarter and Annual Averages 2014, Preliminary

Nonfarm business sector labor productivity decreased at a 1.8 percent annual rate during the fourth quarter of 2014, the U.S. Bureau of Labor Statistics reported today, as output increased 3.2 percent and hours worked increased 5.1 percent. (All quarterly percent changes in this release are seasonally adjusted annual rates.) The increase in hours worked is the largest increase in this series since a gain of 5.7 percent in the fourth quarter of 1998. From the fourth quarter of 2013 to the fourth quarter of 2014, productivity was unchanged as output and hours worked both increased 3.1 percent. (See table A.) Annual average productivity increased 0.8 percent from 2013 to 2014. (See table C.)

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.

Unit labor costs in the nonfarm business sector increased 2.7 percent in the fourth quarter of 2014, reflecting a 0.9 percent increase in hourly compensation and a 1.8 percent decline in productivity. Unit labor costs increased 1.9 percent over the last four quarters. (See tables A and 2.)

BLS calculates 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 1.3 percent in the fourth quarter of 2014, as output increased 5.7 percent and hours worked increased 4.3 percent. Productivity increased 1.5 percent in the durable manufacturing sector and increased 0.2 percent in the nondurable manufacturing sector. (See tables A, 3, 4, and 5.) Over the last four quarters, manufacturing productivity increased 2.8 percent, as output increased 4.8 percent and hours increased 1.9 percent. Unit labor costs in manufacturing increased 0.2 percent in the fourth quarter of 2014 and decreased 0.4 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.

Unit labor costs rose 1.5 percent in 2014, as hourly compensation grew faster than productivity. Real hourly compensation, which takes into account changes in consumer prices, increased 0.7 percent in 2014.

In the manufacturing sector, productivity increased 2.5 percent from 2013 to 2014, and unit labor costs were unchanged. Real hourly compensation in manufacturing increased 0.8 percent--the first annual increase in the series since 2009 (3.8 percent).

Revised measures

Revised and previous measures for the third quarter of 2014 are shown in tables B and D and cover the following major sectors: nonfarm business, business, manufacturing, and nonfinancial corporations.

In the third quarter of 2014, nonfarm business productivity was revised up 1.4 percentage points, to an increase of 3.7 percent; this is due solely to an upward revision to output, as hours worked were unrevised. (See table B.) Unit labor costs for the nonfarm business sector fell 2.3 percent in the third quarter--rather than falling 1.0 percent as previously reported--due solely to the upward revision to productivity.

In the manufacturing sector, productivity was revised up 0.3 percentage points, to an increase of 3.2 percent. Manufacturing unit labor costs were revised down, to a decline of 1.7 percent.

In the nonfinancial corporate sector, productivity increased 1.7 percent, after a 0.6 percentage point upward revision which was due solely to an upward revision to output. (See table D.)

Quarterly and annual data for all sectors from 2012 to 2014 appear in tables 1-6. Full historical measures can be found on the Productivity and Costs home page: www.bls.gov/lpc/#data.

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, third quarter 2014