2016 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 2016, Preliminary

Nonfarm business sector labor productivity decreased at a 0.5-percent annual rate during the second quarter of 2016, the U.S. Bureau of Labor Statistics reported today, as output increased 1.2 percent and hours worked increased 1.8 percent. (All quarterly percent changes in this release are seasonally adjusted annual rates.) From the second quarter of 2015 to the second quarter of 2016, productivity decreased 0.4 percent, the first four-quarter decline in the series since a 0.6-percent decrease in the second quarter of 2013. (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 2.0 percent in the second quarter of 2016, reflecting a 1.5-percent increase in hourly compensation and a 0.5-percent decline 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 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 29, 2016. 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 decreased 0.2 percent in the second quarter of 2016, as output and hours worked decreased 0.8 percent and 0.7 percent, respectively. Output per hour increased 2.6 percent in the durable goods manufacturing sector reflecting a 2.0-percent decline in hours worked and a 0.5-percent increase in output. Productivity decreased 4.1 percent in the nondurable goods sector in the second quarter of 2016, following a 4.0- percent first-quarter increase. Over the last four quarters, manufacturing productivity increased 0.9 percent, as output increased 0.3 percent and hours declined 0.6 percent. (See tables A, 3, 4, and 5.) Unit labor costs in manufacturing increased 3.1 percent in the second quarter of 2016 and rose 1.7 percent from the same quarter a year ago. Hourly compensation increased 2.9 percent in the second quarter of 2016.

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.

Revised measures

Measures of output for the business, nonfarm business, and nonfinancial corporate sectors, and measures of compensation for all sectors incorporate revised National Income and Product Accounts (NIPA) data released on July 29 by the Bureau of Economic Analysis, U.S. Department of Commerce. Hours and related measures were revised back to 2007 for the business, nonfarm business, and nonfinancial corporate sectors. These revisions were due to the incorporation of 2012 Economic Census data on employment, as well as revised NIPA data on government enterprises employment and the proportion of sector compensation paid to employees of nonprofit institutions and nonfinancial corporations. Measures of manufacturing output and all related measures were revised back to 1987 to reflect revised output indexes constructed by the BLS using data from the U.S. Department of Commerce.

Nonfarm business sector productivity decreased 0.6 percent in the first quarter of 2016--the same as the preliminary estimate--as a small downward revision to output was offset by a small downward revision to hours. Due to a 4.7-percentage point downward revision to first-quarter hourly compensation, unit labor costs decreased 0.2 percent in the first quarter of 2016, rather than increasing 4.5 percent as reported June 7. Real hourly compensation decreased 0.4 percent after revision, rather than the previously-published increase of 4.2 percent.

Annual Average productivity growth in the nonfarm business sector in 2015 was revised up to an increase of 0.9 percent. (See table C.) Productivity growth was unrevised in 2014 at 0.8 percent, and was revised up to an increase of 0.3 percent in 2013. The average annual rate of productivity growth from 2007 to 2015--the period affected by the revisions--was revised up from 1.2 percent to 1.3 percent per year, but still remains well below the long-term rate from 1947 to 2015 of 2.2 percent per year.

Manufacturing sector productivity increased 1.5 percent in the first quarter of 2016--slightly more than previously reported--reflecting both a small downward revision to hours and a small upward revision to output. Productivity decreased 0.2 percent in the durable goods sector and increased 4.0 percent in the nondurable goods sector. Unit labor costs decreased 5.9 percent in the manufacturing sector rather than increasing 1.1 percent as reported June 7, due to both the upward revision to productivity and a 7.1-percentage point downward revision to hourly compensation. Real hourly compensation decreased 4.3 percent, as revised.

Annual average manufacturing productivity grew 0.3 percent in 2015, slightly more than the previous estimate of 0.2 percent. Unit labor costs increased 2.2 percent, as revised. There were also historical revisions to manufacturing productivity for the complete series, going back to 1987. Productivity was revised slightly up in 2014 to an increase of 0.1 percent, and was revised down 0.5 percentage point to an increase of 0.2 percent in 2013. (See tables C, 3, 4, and 5.) Average annual productivity from 1987 to 2015 increased 3.3 percent, the same rate as was previously reported.

Nonfinancial corporate sector productivity growth was revised down in the first quarter of 2016, to an increase of 1.4 percent, rather than the previously-published increase of 2.5 percent; this revision was mainly due to a downward revision to output. Annual average productivity in the nonfinancial corporate sector increased 0.9 percent in 2015, the same rate as was previously reported. This measure was revised up 0.7 percentage point in 2014 to an increase of 1.2 percent, and was revised down slightly in 2013 to an increase of 0.8 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 average