2016 Second 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.

Second Quarter 2016, Revised

Nonfarm business sector labor productivity decreased at a 0.6-percent annual rate during the second quarter of 2016, the U.S. Bureau of Labor Statistics reported today, as output increased 1.1 percent and hours worked increased 1.7 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 decline 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 4.3 percent in the second quarter of 2016, reflecting a 3.7-percent increase in hourly compensation and a 0.6-percent decline in productivity. Unit labor costs increased 2.6 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 decreased 0.4 percent in the second quarter of 2016, as output and hours worked decreased 0.8 percent and 0.4 percent, respectively. Output per hour increased 2.4 percent in the durable goods manufacturing sector reflecting a 0.7-percent increase in output and a 1.8-percent decline in hours worked. Productivity decreased 4.4 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 6.7 percent in the second quarter of 2016 and rose 2.5 percent from the same quarter a year ago. Hourly compensation increased 6.3 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.

Preliminary second quarter 2016 measures of productivity and costs were announced for the nonfinancial corporate sector. Productivity decreased 2.1 percent in the second quarter of 2016--the largest decline since a 3.1 percent decline in the third quarter of 2013--as output decreased 0.7 percent, and hours worked increased 1.4 percent. Unit labor costs increased 5.9 percent, reflecting both a 3.7 percent increase in hourly compensation and a 2.1 percent decline in productivity. (See tables C and 6.)

Revised measures

The measures released today are based on more recent source data than were available for the preliminary report. Table B presents previous and revised productivity and related measures for the nonfarm business, business, and manufacturing sectors.

In the second quarter of 2016, nonfarm business productivity was revised down slightly to a decline of 0.6 percent. Output was revised down slightly to an increase of 1.1 percent, and hours were revised down slightly to an increase of 1.7 percent. Unit labor costs increased 4.3 percent rather than increasing 2.0 percent as reported August 9, due mainly to a 2.2-percentage point upward revision to hourly compensation, in addition to the slight downward revision to productivity.

In the second quarter of 2016, manufacturing sector productivity was revised down to a decline of 0.4 percent from a previously-reported decline of 0.2 percent. Unit labor costs increased 6.7 percent, higher than the preliminary estimate of 3.1 percent. Durable and nondurable goods manufacturing unit labor costs were also revised up, to increases of 3.0 percent and 13.0 percent, respectively. After revision, nondurable goods unit labor costs had its largest gain in the series since a 13.2-percent gain in the fourth quarter of 2008.

In the first quarter of 2016, nonfarm business productivity decreased at the same 0.6-percent rate reported in the previous estimate. Unit labor costs were revised down slightly. Manufacturing sector productivity was revised down to an increase of 1.3 percent. Hourly compensation and unit labor costs were revised downward slightly.

In the nonfinancial corporate sector, first-quarter 2016 productivity was revised down slightly to an increase of 1.3 percent. Unit labor costs were revised down slightly to a decrease of 3.2 percent (See table C.)

Full historical annual and quarterly 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