2017 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 2017, Revised

Nonfarm business sector labor productivity increased 1.5 percent during the second quarter of 2017, the U.S. Bureau of Labor Statistics reported today, as output increased 4.0 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 1.3 percent, reflecting a 2.8-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 0.2 percent in the second quarter of 2017, reflecting a 1.8-percent increase in hourly compensation and a 1.5-percent increase in productivity. Unit labor costs decreased 0.2 percent over the last four quarters. (See tables A1 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 2.9 percent in the second quarter of 2017, as output increased 2.1 percent and hours worked decreased 0.7 percent. The increase in manufacturing output per hour is the largest since the first quarter of 2012, when the measure increased 3.2 percent. Productivity increased 3.8 percent in the durable goods manufacturing sector and increased 0.5 percent in the nondurable goods sector in the second quarter of 2017. The larger productivity gain in durable goods industries was due primarily to a 2.7-percent decline in hours worked, as output increased 1.0 percent. In contrast, the modest increase in nondurable manufacturing productivity reflected a 2.8-percent increase in hours worked and a 3.4- percent increase in output. Over the last four quarters, total manufacturing sector productivity increased 1.1 percent, as output increased 1.6 percent and hours worked increased 0.5 percent. (See tables A1, 3, 4 and 5.) Unit labor costs in manufacturing decreased 0.4 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.

Preliminary second-quarter 2017 measures of productivity and costs were announced for the nonfinancial corporate sector. Productivity increased 4.6 percent in the second quarter of 2017, as output increased 7.8 percent, and hours worked increased 3.1 percent; the increase in output was the largest since a 9.9-percent gain in the first quarter of 2012. Unit labor costs decreased 2.6 percent, as hourly compensation increased 1.9 percent and productivity increased 4.6 percent. (See tables A2 and 6.)

Revised measures

The measures released today are based on more recent source data than were available for the preliminary report. Table B1 presents previous and revised productivity and related measures for the nonfarm business, business, and manufacturing sectors.

In the second quarter of 2017, nonfarm business productivity was revised up 0.6 percentage point to an increase of 1.5 percent. Output was revised up to an increase of 4.0 percent; hours were not revised. Unit labor costs increased 0.2 percent rather than increasing 0.6 percent as reported August 9, as a 0.6-percentage point upward revision to productivity was slightly offset by a 0.2-percentage point upward revision to hourly compensation.

In the second quarter of 2017, manufacturing sector productivity was revised up to an increase of 2.9 percent from a previously-reported increase of 2.5 percent. Unit labor costs decreased 0.4 percent, a slightly larger decline than previously reported. Durable goods manufacturing productivity was not revised, and nondurable goods manufacturing productivity was revised up to an increase of 0.5 percent.

In the first quarter of 2017, nonfarm business productivity increased at the same 0.1-percent rate reported in the preliminary estimate. Unit labor costs were revised down 0.6 percentage point to an increase of 4.8 percent. Manufacturing sector productivity was revised down slightly to an increase of 0.2 percent. Hourly compensation and unit labor costs had upward revisions of 0.2 percentage point and 0.4 percentage point, respectively.

In the nonfinancial corporate sector, first-quarter 2017 productivity increased at the same 2.0-percent rate that was previously reported. Unit labor costs were revised up slightly to an increase of 2.3 percent. (See table B2.)

Hourly compensation and related measures, including unit labor costs, in the business and nonfarm business sectors were revised back to the first quarter of 2014 to incorporate revised data used in the estimation of employee compensation. In both sectors, annual average growth in unit labor costs was revised up 0.1 percentage point in 2016, revised down 0.1 percentage point in 2015, and revised up 0.1 percentage point in 2014.

Full historical annual and quarterly measures can be found on the productivity and costs home page: www.bls.gov/lpc/#data.

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.

Durable Previous quarter 3.8 1.0 -2.7 3.1 3.5 -0.6 manufacturing A year ago 1.3 1.6 0.3 0.9 -1.0 -0.4

Nondurable Previous quarter 0.5 3.4 2.8 1.6 1.9 1.0 manufacturing A year ago 0.8 1.5 0.8 1.9 0.0 1.1

Nonfinancial Previous quarter 4.6 7.8 3.1 1.9 2.2 -2.6 corporate A year ago 1.9 3.7 1.8 1.1 -0.8 -0.8