2017 Fourth 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.

Fourth Quarter and Annual Averages 2017, Revised

Nonfarm business sector labor productivity growth was revised to 0.0 percent in 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 2.5 percent in the fourth quarter of 2017, and increased 1.7 percent over the last four quarters. (See tables A1 and 2.)

Historical Revisions to Productivity and Costs Data Data in this release reflect the annual benchmark revision of BLS Current Employment Statistics program data on nonfarm employment and hours, and the revised seasonal adjustment of those data. See revised measures.

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 6.0 percent in the fourth quarter of 2017, as output increased 6.6 percent and hours worked rose 0.5 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 8.1 percent in the durable goods manufacturing sector and 3.4 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 2.5 percent and hours worked increased 1.4 percent. Unit labor costs in manufacturing decreased 3.3 percent in the fourth quarter of 2017 and increased 1.3 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.

Revised measures

Quarterly and annual measures of hours and related series–-including productivity–-were revised historically for all major sectors. The revisions incorporate revised Current Employment Statistics (CES) program data published February 2, 2018. From 2013 to 2017, the data were subject to revision as a result of annual benchmarking of CES data and revised seasonal adjustment of those data. From 1990 onward, there were small revisions due to the CES update of the nonfarm payroll series to the 2017 North American Industrial Classification System (NAICS) from the 2012 NAICS basis. Index measures related to hours show full historical revisions because the 2009 base year values were revised. In addition to revisions to hours data, third quarter, fourth quarter, and annual average data for 2017 were revised to incorporate regular updates of source data on output and compensation.

Revised and previous measures for the fourth quarter of 2017 are shown in table B1 for the business, nonfarm business, and manufacturing sectors. In the fourth quarter of 2017, nonfarm business productivity was revised up slightly from a decline of 0.1 percent to unchanged (0.0 percent); output and hours worked indexes had small revisions although growth remained at previously reported levels. Unit labor costs were revised up from a rate of 2.0 percent to a rate of 2.5 percent.

Manufacturing productivity increased 6.0 percent rather than 5.7 percent in the fourth quarter of 2017, as a downward revision to output was smaller than a downward revision to hours. Because an upward revision to hourly compensation was larger than an upward revision to productivity, manufacturing unit labor costs were revised up to a decline of 3.3 percent--a smaller decline than the 3.7-percent decrease reported in the preliminary release. (See table B1.)

In the third quarter of 2017, nonfarm business productivity growth was revised down slightly to an increase of 2.6 percent. Unit labor costs were revised up from a decline of 0.1 percent to an increase of 1.0 percent, reflecting both a 0.1-percentage point downward revision to productivity and a 0.9-percentage point upward revision to hourly compensation. In the manufacturing sector, productivity declined by 4.7 percent, a slightly smaller decrease than previously reported. Unit labor costs were revised up due to a 0.5-percentage point upward revision to hourly compensation, and increased 5.8 percent rather than 5.4 percent as previously reported. (See table B2.) Nonfinancial corporate sector productivity increased 0.2 percent in the third quarter of 2017, rather than declining 0.4 percent as previously reported; an upward revision to output was larger than an upward revision to hours. (See table A2.)

Annual averages

Unit labor costs in the nonfarm business sector increased 0.4 percent in 2017, reflecting increases of 1.6 percent in hourly compensation and 1.2 percent in productivity. Real hourly compensation, which takes into account changes in consumer prices, decreased 0.5 percent in 2017. Labor share, which is the percentage of output that accrues to workers in the form of compensation, was 56.6 percent in 2017, which is the lowest annual average in the series going back to 1947.

In the manufacturing sector, productivity increased 0.6 percent in 2017, as output increased 1.6 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 1.0 percent in 2017.

Durable Previous quarter 8.1 8.1 0.0 2.4 -1.3 -5.3 manufacturing A year ago 1.8 2.7 0.9 2.5 0.4 0.7

Nondurable Previous quarter 3.4 4.9 1.5 2.7 -0.9 -0.6 manufacturing A year ago 0.1 2.3 2.2 2.3 0.1 2.2