2017 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 2017, Preliminary

Nonfarm business sector labor productivity increased 0.9 percent during the second quarter of 2017, the U.S. Bureau of Labor Statistics reported today, as output increased 3.4 percent and hours worked increased 2.5 percent. (All quarterly percent changes in this release are seasonally adjusted annual rates.) From the second quarter of 2016 to the second quarter of 2017, productivity increased 1.2 percent, reflecting a 2.7-percent increase in output and a 1.5-percent increase in hours worked. (See tables A1 and 2.)

Labor productivity, or output per hour, is calculated by dividing an index of real output by an index of hours worked by all persons, including employees, proprietors, and unpaid family workers.

Unit labor costs in the nonfarm business sector increased 0.6 percent in the second quarter of 2017, reflecting a 1.6-percent increase in hourly compensation and a 0.9-percent increase in productivity. Unit labor costs decreased 0.2 percent over the last four quarters. (See tables A1 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 28, 2017. 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 increased 2.5 percent in the second quarter of 2017, as output increased 1.6 percent and hours worked decreased 0.9 percent. Output per hour increased 3.8 percent in the durable goods manufacturing sector and edged down 0.1 percent in the nondurable goods sector. Over the last four quarters, manufacturing sector productivity increased 1.0 percent, as output increased 1.5 percent and hours worked increased 0.4 percent. (See tables A1, 3, 4 and 5.) Unit labor costs in manufacturing decreased 0.3 percent in the second quarter of 2017 and rose 0.1 percent from the same quarter a year ago.

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 for first-quarter 2014 through first-quarter 2017 released on July 28 by the Bureau of Economic Analysis, U.S. Department of Commerce. Measures of output for the manufacturing sectors incorporate regular updates of source data for the first quarter of 2017 and the fourth quarter of 2016. Hours and related measures were revised back to 2012 for the business and nonfarm business sectors due to revised NIPA data on government enterprises employment and on the proportion of sector compensation paid to employees of nonprofit institutions. Hours and related measures were revised back to 2007 for the nonfinancial corporate sector due to the incorporation of 2012 Economic Census data on employment and revised NIPA data on the proportion of sector compensation paid to employees of corporations.

Nonfarm business sector productivity increased 0.1 percent in the first quarter of 2017--similar to the previously reported estimate (0.0 percent) --the combined effect of a small upward revision to output and a small downward revision to hours. (See table B1.) A large upward revision to first-quarter unit labor costs--from an increase of 2.2 percent to an increase of 5.4 percent--reflected a 3.3-percentage point upward revision to hourly compensation and a 0.1-pecentage point upward revision to productivity. Real hourly compensation increased 2.3 percent after revision, rather than the previously published decrease of 0.9 percent.

Annual Average productivity growth in the nonfarm business sector in 2016 was revised down to a decrease of 0.1 percent. (See table C1.) As revised, the decrease in productivity in 2016 is the first annual decrease since a 1.0- percent decrease in 1982. In 2015 and 2014, annual productivity growth was revised up to increases of 1.3 percent and 1.0 percent, respectively. The average annual rate of productivity growth from 2012 to 2016--the period affected by the revisions--was unrevised at 0.6 percent per year. Unit labor costs increased 1.0 percent in the nonfarm business sector in 2016, rather than increasing 2.2 percent, as a 1.6-percentage point downward revision to hourly compensation was partially offset by a 0.3-percentage point downward revision to productivity. As revised, hourly compensation increased 0.9 percent in the nonfarm business sector, the smallest increase in the series which begins in 1947. Real hourly compensation declined 0.4 percent in 2016 rather than increasing 1.2 percent. There were small upward revisions to hourly compensation and real hourly compensation in 2014 and 2015.

Manufacturing sector productivity increased 0.3 percent in the first quarter of 2017--slightly less than previously reported. Productivity decreased 0.9 percent in the durable goods sector and increased 2.6 percent in the nondurable goods sector. (See table B1.) Unit labor costs increased 3.9 percent in the manufacturing sector rather than increasing 2.4 percent as reported June 5, reflecting both a small downward revision to productivity and a 1.3-percentage point upward revision to hourly compensation. Real hourly compensation increased 1.0 percent, as revised.

Annual average manufacturing productivity grew 0.2 percent in 2016, unrevised from the previously reported estimate. Productivity was unrevised in the manufacturing sector in 2015 and 2014. Unit labor costs was revised down to an increase of 0.6 percent in 2016, reflecting a 1.9-percentage point downward revision to hourly compensation. After revision, manufacturing real hourly compensation declined 0.5 percent in 2016 rather than increasing 1.3 percent. (See tables C1, 3, 4, and 5.)

Nonfinancial corporate sector productivity growth was revised up in the first quarter of 2017, to an increase of 2.0 percent, rather than the previously published decrease of 1.5 percent; this revision was due solely to a 3.5- percentage point upward revision to output; hours were unrevised. (See table A2.)

Annual average productivity in the nonfinancial corporate sector decreased 0.1 percent in 2016, a downward revision from the previously reported 0.4-percent increase. This measure was revised up 0.6 percentage point in 2015 to an increase of 1.4 percent, and was revised up 1.0 percentage point in 2014 to an increase of 1.3 percent. (See tables C1 and 6.)

Methodology change for manufacturing output

Beginning with the Productivity and Costs news release scheduled for December 6, 2017, BLS plans to incorporate source data reflecting a change in methodology for estimating manufacturing output. For more information see: www.bls.gov/mfp/sectoraloutputrevisions.htm.

Manufacturing Previous quarter 2.5 1.6 -0.9 2.2 2.5 -0.3 A Year ago 1.0 1.5 0.4 1.1 -0.8 0.1 Durable manufacturing Previous quarter 3.8 0.9 -2.7 3.0 3.3 -0.8 A year ago 1.3 1.7 0.3 0.8 -1.1 -0.5 Nondurable manufacturing Previous quarter -0.1 2.3 2.4 1.1 1.4 1.2 A year ago 0.6 1.3 0.7 1.7 -0.2 1.1