2014 Fourth 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.

Fourth Quarter and Annual Averages 2014, Revised

Nonfarm business sector labor productivity decreased at a 2.2 percent annual rate during the fourth quarter of 2014, the U.S. Bureau of Labor Statistics reported today, as output increased 2.6 percent and hours worked increased 4.9 percent. (All quarterly percent changes in this release are seasonally adjusted annual rates.) From the fourth quarter of 2013 to the fourth quarter of 2014, productivity decreased 0.1 percent reflecting increases in output and hours worked of 2.9 percent and 3.0 percent, respectively. (See table A.) Annual average productivity increased 0.7 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. Measures released today were based on more recent source data than were available for the preliminary report.

Unit labor costs in the nonfarm business sector increased 4.1 percent in the fourth quarter of 2014, reflecting a 1.9 percent increase in hourly compensation and a 2.2 percent decline in productivity. Unit labor costs increased 2.6 percent over the last four quarters. (See tables A and 2.)

Data in this release reflect the annual benchmark revision of BLS Current Employment Statistics program data on nonfarm employment and hours, and the revised seasonal adjustment of those data. More detail can be found in tables 1-6 and appendix tables 1-6. See Revised measures.

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 decreased 0.1 percent in the fourth quarter of 2014, as output increased 4.3 percent and hours worked increased 4.4 percent. Productivity increased 0.5 percent in the durable manufacturing sector and decreased 1.5 percent in the nondurable manufacturing sector. (See tables A, 3, 4, and 5.) Over the last four quarters, manufacturing productivity increased 2.4 percent, as output increased 4.5 percent and hours increased 2.0 percent. Unit labor costs in manufacturing increased 1.5 percent in the fourth quarter of 2014 and were unchanged 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

Quarterly and annual measures of hours and related series-including productivity-were revised back to 1990 for all major sectors. The revisions incorporate revised Current Employment Statistics (CES) program data published February 6, 2015. From 2010 forward the data were subject to revision as a result of annual benchmarking of CES data and revised seasonal adjustment of those data. Prior to 2010 there were small revisions due to CES coverage changes affecting two manufacturing industries. Index measures related to hours show full historical revisions because the 2009 base year values were revised; resulting revisions to percent changes are small. Third quarter, fourth quarter, and annual average data for 2014 were also revised for regular updates of source data on output and compensation.

Revised and previous measures for the third and fourth quarters of 2014 are shown in table B for the business, nonfarm business, and manufacturing sectors. Revised annual average measures for 2010 to 2014 are shown in table C for the nonfarm business and manufacturing sectors. Revised third quarter measures for the nonfinancial corporate sector are shown in table D. Quarterly and annual data for all sectors appear in tables 1-6 for 2012 through 2014 and in appendix tables 1-6 for 2009 through 2011. Full historical annual and quarterly measures can be found on the labor productivity and costs home page at www.bls.gov/lpc/#data.

In the fourth quarter of 2014, nonfarm business productivity decreased 2.2 percent rather than 1.8 percent as reported February 5. The revised figure reflects a 0.6 percentage point downward revision to output and a 0.2 percentage point downward revision to hours. The 4.9 percent increase in hours worked remains the largest increase in this series since a gain of 5.7 percent in the fourth quarter of 1998. Unit labor costs increased 4.1 percent, a larger increase than was previously reported.

Manufacturing productivity declined 0.1 percent rather than increasing 1.3 percent, a combination of a downward revision to output and a small upward revision to hours. This was the first decrease in the productivity measure since a 1.6 percent decrease in the fourth quarter of 2011. Because the downward revision to productivity was larger than a downward revision to hourly compensation, manufacturing unit labor costs increased 1.5 percent, rather than 0.2 percent as reported in the preliminary release. (See table B.)

In the third quarter of 2014, nonfarm business productivity growth was little changed, at 3.9 percent, reflecting a slight downward revision to hours. Unit labor costs decreased 1.0 percent, as revised, reflecting the small upward revision to productivity and a 1.5 percentage point upward revision to hourly compensation. In the manufacturing sector, productivity increased 3.5 percent rather than 3.2 percent as previously reported. The revision reflected a small upward revision to output and a small downward revision to hours. (See table B.) Nonfinancial corporate sector productivity increased 1.8 percent in the third quarter of 2014. (See table D.)

When the annual average indexes of output per hour are compared, nonfarm business sector productivity rose 0.7 percent from 2013 to 2014 reflecting increases of 3.0 percent in output and 2.3 percent in hours worked. The increase in hours in 2014 was the largest increase in the annual measure since 1997 (3.5 percent). Since 2010, productivity has increased at an average annual rate of 0.7 percent, reflecting average annual growth rates of 2.8 percent in output and 2.1 percent in hours worked. Output per hour has increased at an average annual rate of 2.1 percent since 1990 as output increased 2.8 percent and hours increased 0.7 percent. Unit labor costs rose 1.8 percent from 2013 to 2014 in the nonfarm business sector.

In the manufacturing sector, annual average productivity growth was revised down to 2.2 percent in 2014. Productivity growth over the last four years of 1.5 percent per year on average reflects annual average rates of growth in output and hours of 3.2 percent and 1.7 percent, respectively. Manufacturing unit labor costs increased 0.1 percent in 2014 as the 2.2 percent increase in productivity was outpaced by the 2.3 percent increase in compensation per hour. Real hourly compensation increased 0.6 percent in 2014, after four consecutive years of decreases in the measure (See table C.)

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