2015 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 2015, Preliminary

Nonfarm business sector labor productivity increased at a 1.3 percent annual rate during the second quarter of 2015, the U.S. Bureau of Labor Statistics reported today, as output increased 2.8 percent and hours worked increased 1.5 percent. (All quarterly percent changes in this release are seasonally adjusted annual rates.) From the second quarter of 2014 to the second quarter of 2015, productivity increased 0.3 percent, reflecting increases in output and hours worked of 2.8 percent and 2.6 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.

Unit labor costs in the nonfarm business sector increased 0.5 percent in the second quarter of 2015, reflecting a 1.8 percent increase in hourly compensation and a 1.3 percent increase in productivity. Unit labor costs increased 2.1 percent over the last four quarters. (See tables A and 2.)

Historical Revisions to Productivity and Costs Data

Data in this release reflect the revisions 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, 2015. See “Revised measures” section.

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 labor productivity increased 2.5 percent in the second quarter of 2015, as output increased 1.5 percent and hours worked decreased 1.0 percent. Productivity increased 3.4 percent in the durable manufacturing sector and 1.2 percent in the nondurable goods sector. (See tables A, 3, 4, and 5.) Over the last four quarters, manufacturing productivity increased 1.1 percent, as output increased 2.3 percent and hours increased 1.2 percent. Unit labor costs in manufacturing decreased 2.3 percent in the second quarter of 2015 and increased 0.2 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

Productivity, unit labor costs, and related measures in the business and nonfarm business sectors were subject to revision going back to 2010, due to revisions in source data including output, compensation, and hours. 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 to incorporate revised NIPA data on government enterprises employment and the proportion of sector compensation paid to employees of nonprofit institutions. Measures of manufacturing output and all related measures were revised back to 1987 to reflect revised output indexes constructed by BLS using data from the U.S. Department of Commerce. In particular, the revisions incorporate data from the 2012 Economic Census as well as improvements to BLS methodology for estimating annual manufacturing output. Output data for the manufacturing sector also incorporate historically revised indexes of industrial production published by the Board of Governors of the Federal Reserve System on July 21.

Nonfarm business sector productivity decreased 1.1 percent in the first quarter of 2015--rather than falling 3.1 percent as reported June 4--solely reflecting a 2.1-percentage point upward revision to output; hours increased at the same 1.6 percent rate reported previously. Unit labor costs increased 2.3 percent in the first quarter of 2015--much less than a previously- published increase of 6.7 percent--due to both the upward revision to productivity and a 2.2-percentage point downward revision to hourly compensation. Real hourly compensation increased 4.2 percent after revision, rather than the previous estimate of 6.5 percent.

There were historical revisions to quarterly series of labor productivity in the nonfarm business sector. Percent changes from previous quarter were revised beginning in 2011. Most notable were downward revisions in the third quarters of both 2012 and 2013, and the upward revision in the first quarter of 2015. The average growth rate from the first quarter of 2011 to the first quarter of 2015 was revised down by 0.1 percentage point, to a rate of 0.5 percent.

There were also revisions to percent changes from the same quarter a year ago, beginning in 2011. After revision, the four-quarter rate of productivity growth dipped below zero for the first three quarters of 2013. The last time this measure was negative for three consecutive quarters was the first three quarters of 1982; in 2013 hours were rising faster than output, while in 1982 output was falling faster than hours.

Annual Average productivity growth in the nonfarm business sector was not revised for 2014. (See table C.) Productivity growth was revised down in both 2013 and 2012, to rates of 0.0 percent in 2013 and 0.9 percent in 2012. The revised annual rate of 0.0 percent in 2013 is the lowest annual change in productivity since a 1.0 percent decline in 1982. The average annual rate of productivity growth from 2007 to 2014--corresponding to the current business cycle--was revised down from 1.4 percent to 1.3 percent per year, well below the long-term rate from 1947 to 2014 of 2.2 percent per year.

Manufacturing sector productivity declined 0.6 percent in the first quarter of 2015--a smaller decline than previously reported--as an upward revision to output was greater than an upward revision to hours. Unit labor costs decreased 1.1 percent rather than increasing 3.4 percent as reported June 4, due to both the upward revision to productivity and a 4.1-percentage point downward revision to hourly compensation.

Annual average manufacturing productivity grew 1.3 percent in 2014, less than the previous estimate of 2.2 percent. Unit labor costs increased 1.4 percent in 2014, rather than 0.3 percent as previously reported. There were also historical revisions to manufacturing productivity for the complete series, going back to 1987. The revised long-term growth rate from 1987 to 2014 is 3.4 percent, larger than a previous estimate of 3.2 percent. From 1987 to 2000 the average annual rate of growth in manufacturing productivity was revised down from 3.7 percent to 3.5 percent. For the 2000-2007 period the average annual rate was revised up from 3.7 percent to 4.7 percent, and during the current business cycle from 2007 to 2014 the average annual rate was revised up from 1.7 percent to 2.2 percent. This recent period saw the largest single-year revisions--a large downward revision in 2009 followed by large upward revisions in 2010 and 2011.

Nonfinancial corporate sector productivity and related measures were subject to revision back to 2011, to incorporate source data revisions to series from the Bureau of Economic Analysis, including output, compensation, and data on the proportion of employees working in the corporate sector. First- quarter 2015 productivity growth was revised down to a decline of 2.1 percent, rather than the previously-published decline of 1.2 percent; this revision was due solely to a downward revision to output. Annual average productivity was revised down 0.1 percentage points in 2014 to a rate of 0.4 percent, revised up 0.7 percentage points in 2013 to a rate of 1.0 percent, and revised down 0.3 percentage points in 2012 to a rate of 1.6 percent. (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 2015

Percent change, annual average