2016 Third 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.

Third Quarter 2016, Preliminary

Nonfarm business sector labor productivity increased at a 3.1-percent annual rate during the third quarter of 2016, the U.S. Bureau of Labor Statistics reported today, as output increased 3.4 percent and hours worked increased 0.3 percent. (All quarterly percent changes in this release are seasonally adjusted annual rates.) The quarterly increase in nonfarm business sector labor productivity was the first increase after three consecutive declines in the measure. From the third quarter of 2015 to the third quarter of 2016, productivity was unchanged. (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 0.3 percent in the third quarter of 2016, reflecting a 3.4-percent increase in hourly compensation and a 3.1-percent increase in productivity. Unit labor costs increased 2.3 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 1.0 percent in the third quarter of 2016, as output and hours worked increased 1.1 percent and 0.1 percent, respectively. Output per hour increased 2.5 percent in the durable goods manufacturing sector, the combined effect of a 1.9-percent increase in output and a 0.6-percent decline in hours worked. Productivity decreased 1.1 percent in the nondurable goods sector in the third quarter of 2016, following a 4.6-percent second-quarter decrease. Over the last four quarters, manufacturing sector productivity increased 0.2 percent, as output was unchanged and hours worked declined 0.1 percent. (See tables A, 3, 4, and 5.) Unit labor costs in manufacturing increased 2.2 percent in the third quarter of 2016 and rose 2.9 percent from the same quarter a year ago. Hourly compensation increased 3.2 percent in the third 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

Revised and previous measures for the second quarter of 2016 are shown in tables B and C, covering the following major sectors: nonfarm business, business, manufacturing, and nonfinancial corporations.

In the second quarter of 2016, nonfarm business sector productivity decreased 0.2 percent, rather than decreasing 0.6 percent as reported on September 1. The upward revision reflects a 0.5-percentage point upward revision to output; hours were unrevised. Unit labor costs increased 3.9 percent during the second quarter--rather than increasing 4.3 percent as previously reported--due to the 0.4-percentage point upward revision to productivity. In the manufacturing sector, productivity was revised down slightly to a decrease of 0.5 percent from a previously-reported decline of 0.4 percent, reflecting small downward revisions to both output and hours. Unit labor costs increased 6.8 percent rather than 6.7 percent.

Second-quarter 2016 measures of productivity and costs were revised for the nonfinancial corporate sector. Productivity decreased 2.3 percent rather than 2.1 percent as reported on September 1. Unit labor costs increased 6.2 percent rather than the preliminary estimate of 5.9 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