2017 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 2017, Revised

Nonfarm business sector labor productivity increased 3.0 percent during the third quarter of 2017, the U.S. Bureau of Labor Statistics reported today, as output increased 4.1 percent and hours worked increased 1.1 percent. The productivity increase was the largest since the third quarter of 2014, when output per hour increased 4.4 percent. (All quarterly percent changes in this release are seasonally adjusted annual rates.) From the third quarter of 2016 to the third quarter of 2017, productivity increased 1.5 percent, reflecting a 3.0-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 declined 0.2 percent in the third quarter of 2017, as the 3.0-percent increase in productivity was greater than a 2.7-percent increase in hourly compensation. Unit labor costs decreased 0.7 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 fell 4.4 percent in the third quarter of 2017, as output decreased 1.1 percent and hours worked increased 3.5 percent. This was the largest quarterly decline in manufacturing sector productivity since the fourth quarter of 2008 (-5.4 percent). Productivity decreased 4.7 percent in the durable goods manufacturing sector and 4.4 percent in the nondurable goods sector in the third quarter of 2017. Over the last four quarters, total manufacturing sector productivity increased 0.3 percent, as output increased 1.5 percent and hours worked increased 1.2 percent. Unit labor costs in manufacturing increased 4.8 percent in the third quarter of 2017 and rose 0.3 percent from the same quarter a year ago. (See tables A1 and 3.)

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 2017 measures of productivity and costs were announced for the nonfinancial corporate sector. Productivity was unchanged in the third quarter of 2017 and increased 0.2 percent over the last four quarters. Unit labor costs increased 2.5 percent in the third quarter of 2017 and increased 0.6 percent over the last four quarters. (See tables A2 and 6.)

Revised measures

Measures released today are based on more recent source data than were available for the preliminary report. Regular updates of source data from the BLS, the Bureau of Economic Analysis (BEA), and the Board of Governors of the Federal Reserve System are reflected in data for the second and third quarters of 2017.

In the third quarter of 2017, nonfarm business labor productivity increased 3.0 percent--the same as the preliminary estimate; output and hours worked were both revised up by 0.3 percentage points. Unit labor costs were revised from a 0.5-percent increase to a 0.2-percent decline for the third quarter of 2017. In the manufacturing sector, productivity decreased 4.4 percent rather than declining 5.0 percent as previously reported, as an upward revision to output was greater than an upward revision to hours worked. Unit labor costs increased 4.8 percent, a smaller increase than the preliminary estimate.

In the second quarter of 2017, nonfarm business labor productivity, output, and hours were unrevised. Unit labor costs decreased 1.2 percent, rather than increasing 0.3 percent as previously reported. In the manufacturing sector, productivity was revised up 0.2 percentage point to an increase of 3.6 percent, due to a slight upward revision to output. Unit labor costs decreased 1.2 percent instead of a decline of 1.0 percent.

Second-quarter 2017 measures of productivity and costs were revised for the nonfinancial corporate sector. Productivity increased 3.3 percent rather than 4.4 percent as reported on November 2. Unit labor costs decreased 3.0 percent rather than the preliminary estimate of a 2.3-percent decline.

There were historical revisions to manufacturing output and all related measures--including productivity--back to 1987 to reflect revised output indexes constructed by the BLS using an improved methodology for estimating the sectoral output of manufacturing industries. A new technique for benchmarking output estimates to the Economic Census was an important component of the revisions, and the period between Census years 2007 and 2012 saw the largest revisions. For more complete information see www.bls.gov/mfp/sectoraloutputrevisions.htm.

Revisions to labor productivity mirrored revisions to output; hours worked were not revised. A large upward revision to the change in the annual manufacturing productivity index from 2008 to 2009 was more than offset by downward revisions in adjacent years, and the average annual rate of growth from 2007 to 2012 was revised down from 2.9 percent to 1.2 percent. The average annual rate of manufacturing productivity growth during the current business cycle from 2007 to 2016 was revised down from 1.6 percent to 0.9 percent, and the long-term rate for the entire series from 1987 to 2016 is now 2.8 percent, compared to the previous estimate of 3.2 percent.

Hourly compensation and all related measures for the manufacturing sectors also were revised, from 1987 to 2000, to incorporate source data on compensation published by the BEA November 2, 2017.

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

Calendar year 2018 release dates for Productivity and Costs news releases are now available at www.bls.gov/schedule/news_release/prod2.htm.

Nonfinancial Previous quarter 0.0 1.3 1.2 2.5 0.5 2.5 corporate A year ago 0.2 1.9 1.7 0.8 -1.1 0.6