2016 First 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.

First Quarter 2016, Revised

Nonfarm business sector labor productivity decreased at a 0.6-percent annual rate during the first quarter of 2016, the U.S. Bureau of Labor Statistics reported today, as output increased 0.9 percent and hours worked increased 1.5 percent. (All quarterly percent changes in this release are seasonally adjusted annual rates.) From the first quarter of 2015 to the first quarter of 2016, productivity increased 0.7 percent. (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. 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 4.5 percent in the first quarter of 2016, reflecting a 3.9-percent increase in hourly compensation and a 0.6-percent decline in productivity. Unit labor costs increased 3.0 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 labor productivity increased 1.3 percent in the first quarter of 2016, as output increased 0.6 percent and hours worked decreased 0.7 percent. Productivity decreased 0.6 percent in the durable goods manufacturing sector and increased 4.2 percent in the nondurable goods sector. Over the last four quarters, manufacturing productivity increased 1.3 percent, as output increased 0.6 percent and hours declined 0.7 percent. (See tables A, 3, 4, and 5.) Unit labor costs in manufacturing increased 1.1 percent in the first quarter of 2016 and rose 3.6 percent from the same quarter a year ago. Hourly compensation increased 2.5 percent in the first quarter of 2016, and 5.0 percent since the same quarter a year ago--the largest four-quarter gain since a 5.8-percent increase from the first quarter of 2004 to the first quarter of 2005. (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 the Technical Notes for a more detailed explanation.

Preliminary first quarter 2016 measures were announced today for the nonfinancial corporate sector. Productivity increased 2.5 percent in the first quarter of 2016 and increased 0.8 percent over the last four quarters. Unit profits of nonfinancial corporations grew at a 13.4 percent annual rate in the first quarter of 2016, but fell 8.0 percent over the last four quarters. (See tables C and 6.)

Revised measures

In the first quarter of 2016, nonfarm business productivity fell 0.6 percent, a smaller decline than the preliminary estimate, due to a 0.5-percentage point upward revision to output. Unit labor costs were revised up as a 0.9- percentage point upward revision to hourly compensation was partially offset by the 0.4-percentage point upward revision to productivity. In the manufacturing sector, productivity increased 1.3 percent in the first quarter of 2016--less than the preliminary estimate--reflecting an upward revision to hours worked and a slight downward revision to output. Unit labor costs increased 1.1 percent rather than declining 1.2 percent, due primarily to a 1.9-percentage point upward revision to hourly compensation.

In the fourth quarter of 2015, nonfarm business sector productivity decreased at the same 1.7-percent rate reported May 4, while manufacturing productivity was revised down slightly. In both sectors, large upward revisions to hourly compensation resulted in large upward revisions to unit labor costs.

In the nonfinancial corporate sector, productivity declined 0.9 percent in the fourth quarter of 2015 rather than falling 2.2 percent as previously reported, due solely to an upward revision to output. Annual average productivity increased 0.9 percent from 2014 to 2015, slightly more than the 0.8-percent increase reported May 4, but well below the long-term rate from 1947 to 2015 of 2.3 percent. Unit profits of nonfinancial corporations fell 36.6 percent in the fourth quarter of 2015. (See tables C and 6.)

Complete annual and quarterly data series can be found on the Productivity and Costs home page: www.bls.gov/lpc/#data.

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