2018 First 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.

First Quarter 2018, Preliminary

Nonfarm business sector labor productivity increased 0.7 percent during the first quarter of 2018, the U.S. Bureau of Labor Statistics reported today, as output increased 2.8 percent and hours worked increased 2.1 percent. (All quarterly percent changes in this release are seasonally adjusted annual rates.) From the first quarter of 2017 to the first quarter of 2018, productivity increased 1.3 percent, reflecting a 3.6-percent increase in output and a 2.2-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 2.7 percent in the first quarter of 2018, reflecting a 3.4-percent increase in hourly compensation and a 0.7-percent increase in productivity. 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. When the change in consumer prices was taken into account, real hourly compensation declined 0.1 percent in the first quarter of 2018. Unit labor costs increased 1.1 percent over the last four quarters. (See tables A1 and 2.)

Manufacturing sector labor productivity rose 0.5 percent in the first quarter of 2018, as output increased 3.3 percent and hours worked increased 2.8 percent. Productivity increased 1.3 percent in the durable manufacturing sector, as output grew at a 5.5-percent rate and hours worked increased 4.2 percent. In the non-durable goods manufacturing sector, a 0.6-percent increase in productivity reflected a 1.1-percent increase in output and a 0.5-percent increase in hours worked. Over the last four quarters, total manufacturing sector productivity increased 0.8 percent, as output increased 2.5 percent and hours worked increased 1.6 percent. Unit labor costs in manufacturing increased 2.7 percent in the first quarter of 2018 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.

Preliminary fourth quarter and annual 2017 measures were announced today for the nonfinancial corporate sector. Productivity increased 0.8 percent in the fourth quarter of 2017 and increased 1.7 percent over the last four quarters. Annual average productivity increased 1.0 percent from 2016 to 2017, following a decline of 0.1 percent in the previous year. The historical average annual rate of productivity growth in the nonfinancial corporate sector between 1947 and 2017 is 2.2 percent. (See tables A2, C1, and 6.)

Revised measures

Hours and related measures, including productivity, were revised back to 2013 for all sectors to incorporate updated ratios of hours worked to hours paid by detailed industry; resulting revisions are small. Measures of real hourly compensation for all sectors were revised from 2010 forward to incorporate new and revised data from the BLS Office of Prices and Living Conditions. Output and related measures--including labor productivity and unit labor costs--for the manufacturing sector incorporate historically revised indexes of industrial production published by the Board of Governors of the Federal Reserve System on March 23, 2018.

In the fourth quarter of 2017, nonfarm business sector productivity increased 0.3 percent, rather than unchanged as reported March 7. Unit labor costs were revised down to an increase of 2.1 percent. Total manufacturing sector productivity increased 4.5 percent in the fourth quarter of 2017, a smaller increase than previously reported, reflecting both a downward revision to output and an upward revision to hours worked. Unit labor costs in the manufacturing sector decreased 2.2 percent during the fourth quarter, a smaller decline than previously reported. Fourth-quarter 2017 labor productivity was revised down 3.0 percentage points in the durable goods sector to an increase of 5.1 percent, and was revised up 0.1 percentage point in the nondurable goods sector to an increase of 3.5 percent. (See table B1.)

Annual average productivity growth in the nonfarm business sector was revised up for 2017, from 1.2 percent to 1.3 percent. (See table 2.) The annual average rate of manufacturing productivity growth for 2017 was revised down slightly from 0.6 percent to 0.4 percent, and the rate for 2016 was revised down from positive 0.4 percent to negative 0.4 percent. (See table 3.) The average annual rate of productivity growth in the total manufacturing sector from 2007 to 2017--corresponding to the current business cycle--was revised down from 0.8 percent to 0.7 percent.

Quarterly and annual data for all sectors for recent years appear in tables 1-6 and appendix tables 1-6. Full historical annual and quarterly measures can be found on the labor productivity and costs home page at www.bls.gov/lpc/#data.

Manufacturing Previous quarter 0.5 3.3 2.8 3.2 -0.3 2.7 A Year ago 0.8 2.5 1.6 2.1 -0.1 1.3 Durable manufacturing Previous quarter 1.3 5.5 4.2 4.2 0.7 2.9 A year ago 1.5 2.6 1.2 2.9 0.7 1.4 Nondurable manufacturing Previous quarter 0.6 1.1 0.5 1.0 -2.4 0.4 A year ago -0.1 2.3 2.4 0.7 -1.5 0.9

Nonfinancial Previous quarter 0.8 3.5 2.7 2.0 -1.3 1.2 corporate A year ago 1.7 3.9 2.2 2.6 0.5 0.9