2016 Third 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.

Third Quarter 2016, Revised

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 3.6 percent and hours worked increased 0.5 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. Measures released today are based on more recent source data than were available for the preliminary report.

Unit labor costs in the nonfarm business sector increased 0.7 percent in the third quarter of 2016, reflecting a 3.8-percent increase in hourly compensation and a 3.1-percent increase 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 0.4 percent in the third quarter of 2016, as output and hours worked increased 0.6 percent and 0.3 percent, respectively. Output per hour increased 3.0 percent in the durable goods manufacturing sector and decreased 3.0 percent in the nondurable goods sector. Over the last four quarters, manufacturing sector productivity was unchanged, as output and hours worked both declined 0.1 percent. (See tables A, 3, 4, and 5.) Unit labor costs in manufacturing increased 3.3 percent in the third quarter of 2016 and rose 3.6 percent from the same quarter a year ago. Hourly compensation increased 3.7 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.

Preliminary third-quarter 2016 measures of productivity and costs were announced for the nonfinancial corporate sector. Productivity increased 7.1 percent in the third quarter of 2016--the largest gain since an 8.8-percent gain in the first quarter of 2010--as output increased 8.3 percent and hours worked increased 1.1 percent. Over the last four quarters, productivity increased 1.6 percent. Unit labor costs decreased 2.7 percent in the third quarter of 2016 and increased 0.9 percent over the last four quarters.

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 business, nonfarm business, and manufacturing sectors, for the second and third quarters of 2016.

In the third quarter of 2016, nonfarm business labor productivity was not revised; output and hours were both revised up by 0.2 percentage points. Unit labor costs were revised up from a 0.3-percent increase to a 0.7-percent increase, due solely to an upward revision to hourly compensation growth from 3.4 percent to 3.8 percent. In the manufacturing sector, productivity increased 0.4 percent rather than increasing 1.0 percent as previously reported, due both to a downward revision to output and an upward revision to hours. Unit labor costs increased 3.3 percent, a larger increase than the preliminary estimate.

In the second quarter of 2016, nonfarm business labor productivity, output, and hours were unrevised. Unit labor costs increased 6.2 percent, rather than increasing 3.9 percent as previously reported, the result of a large upward revision to hourly compensation. In the manufacturing sector, labor productivity was not revised. Hourly compensation was revised up to an 8.0- percent increase from a previous estimate of 6.2 percent. As a result, unit labor costs were revised up, and increased 8.5 percent instead of 6.8 percent.

Second-quarter 2016 measures of productivity and costs were revised for the nonfinancial corporate sector. Productivity decreased 1.2 percent rather than decreasing 2.3 percent as reported on November 3, due to a 1.1-percentage point upward revision to output. (See table C.)

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

Upcoming change to table format

Tables A-C will be reformatted to better assist our readers beginning with the next scheduled release of Productivity and Costs, on February 2, 2017. All data currently shown in the tables will continue to be displayed.

Methodology change for hours worked

Beginning with the Productivity and Costs news release scheduled for March 8, 2017, a change in the methodology for estimating hours worked will be implemented. As a result, hours worked and related measures,including labor productivity, will be subject to revision for all sectors from 1989 forward.

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

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