2017 Fourth 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.

Fourth Quarter and Annual Averages 2017, Preliminary

Nonfarm business sector labor productivity decreased 0.1 percent during the fourth quarter of 2017, the U.S. Bureau of Labor Statistics reported today, as output increased 3.2 percent and hours worked increased 3.3 percent. (All quarterly percent changes in this release are seasonally adjusted annual rates.) From the fourth quarter of 2016 to the fourth quarter of 2017, productivity increased 1.1 percent, reflecting a 3.2-percent increase in output and a 2.1-percent increase in hours worked. (See tables A1 and 2.) Annual average productivity increased 1.2 percent from 2016 to 2017. (See table C1.)

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 2.0 percent in the fourth quarter of 2017, due primarily to a 1.8-percent increase in hourly compensation. Unit labor costs increased 1.3 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 5.7 percent in the fourth quarter of 2017, as output increased 7.3 percent and hours worked rose 1.5 percent. These were the largest quarterly increases in manufacturing sector productivity and output since the second quarter of 2010, when output per hour increased 7.0 percent and output jumped 10.7 percent. Productivity increased 6.7 percent in the durable goods manufacturing sector and 4.5 percent in the nondurable goods sector in the fourth quarter of 2017. Over the last four quarters, total manufacturing sector productivity increased 1.1 percent, as output increased 2.7 percent and hours worked increased 1.6 percent. Unit labor costs in manufacturing decreased 3.7 percent in the fourth quarter of 2017 and increased 1.1 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.

Revised measures

Revised and previously published measures for the third quarter of 2017 are shown in tables A2 and B1 and cover the following major sectors: nonfarm business, business, manufacturing, and nonfinancial corporations.

In the third quarter of 2017, nonfarm business productivity was revised down 0.3 percentage point, to an increase of 2.7 percent. (See table B1.) Unit labor costs in the nonfarm business sector decreased 0.1 percent in the third quarter--rather than declining 0.2 percent as previously reported.

In the manufacturing sector, productivity was revised down 0.5 percentage point, to a decrease of 4.9 percent. Manufacturing unit labor costs increased 5.4 percent, a 0.6 percentage point increase over the previously reported figure.

In the nonfinancial corporate sector, productivity was revised down 0.4 percentage point in the third quarter of 2017, to a decrease of 0.4 percent. This downward revision to productivity is due primarily to a 0.3-percentage point downward revision to output. (See table A2.)

Annual averages

Unit labor costs in the nonfarm business sector increased 0.2 percent in 2017, reflecting increases of 1.5 percent in hourly compensation and 1.2 percent in productivity. Real hourly compensation, which takes into account changes in consumer prices, decreased 0.7 percent in 2017.

In the manufacturing sector, productivity increased 0.7 percent in 2017, as output increased 1.7 percent and hours worked increased 1.0 percent. Manufacturing sector productivity has grown less than 1.0 percent in each of the last 7 years. The average annual rate of manufacturing productivity growth from 2007 to 2017 is 0.8 percent, well below the long-term rate from 1987 to 2017 of 2.7 percent. Unit labor costs increased 0.9 percent in 2017.

Quarterly and annual data for all sectors from 2015 to 2017 appear in tables 1-6. Full historical measures can be found on the Productivity and Costs home page: www.bls.gov/lpc/#data.

Data in this release do not reflect the annual benchmark revision of the BLS Current Employment Statistics program data to be released February 2, 2018. This benchmark will be incorporated in our next release on March 7, 2018.

Manufacturing Previous quarter 5.7 7.3 1.5 1.8 -1.8 -3.7 A Year ago 1.1 2.7 1.6 2.2 0.0 1.1 Durable manufacturing Previous quarter 6.7 8.2 1.4 2.6 -1.0 -3.8 A year ago 1.4 2.7 1.3 2.7 0.5 1.3 Nondurable manufacturing Previous quarter 4.5 6.4 1.8 0.3 -3.3 -4.0 A year ago 0.5 2.6 2.1 1.3 -0.8 0.8