2018 First 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.

First Quarter 2018, Revised

Nonfarm business sector labor productivity increased 0.4 percent during the first quarter of 2018, the U.S. Bureau of Labor Statistics reported today, as output increased 2.7 percent and hours worked increased 2.3 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 2.3-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 2.9 percent in the first quarter of 2018, reflecting a 3.3-percent increase in hourly compensation and a 0.4-percent increase in productivity. 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 decreased 1.2 percent in the first quarter of 2018, as output increased 1.7 percent and hours worked increased 2.9 percent. Productivity declined 0.8 percent in the durable manufacturing sector, as output rose 3.3 percent and hours worked increased 4.2 percent. In the non-durable goods manufacturing sector, a 0.9-percent decrease in productivity reflected no change in output and a 0.9-percent increase in hours worked. Over the last four quarters, total manufacturing sector productivity increased 0.3 percent, as output increased 2.0 percent and hours worked increased 1.7 percent. Unit labor costs in manufacturing increased 5.2 percent in the first quarter of 2018 and rose 2.5 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 first-quarter 2018 measures were announced today for the nonfinancial corporate sector. Productivity increased 1.9 percent in the first quarter of 2018 and increased 1.7 percent over the last four quarters. Unit profits of nonfinancial corporations fell at a 9.5 percent annual rate in the first quarter of 2018 and increased 1.7 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. Table B1 presents previous and revised productivity and related measures for the business, nonfarm business, and manufacturing sectors for the first quarter of 2018.

In the first quarter of 2018, nonfarm business productivity rose 0.4 percent, rather than 0.7 percent as reported May 3, the combined effect of a 0.1-percentage point downward revision to output and a 0.2- percentage point upward revision to hours worked. Unit labor costs were revised up--due primarily to the downward revision to productivity--and increased 2.9 percent. In the manufacturing sector, productivity was revised down from an increase of 0.5 percent to a decrease of 1.2 percent, due almost entirely to a 1.6-percentage point downward revision to output. Hourly compensation was revised up 0.7 percentage point. As a result of the downward revision to productivity and the upward revision to hourly compensation, unit labor costs increased 5.2 percent rather than 2.7 percent as previously reported.

In the fourth quarter of 2017, labor productivity in the nonfarm business sector increased at the same 0.3-percent rate reported May 3. Hourly compensation was revised up, and increased 2.9 percent. As a result, unit labor costs increased 2.5 percent in the fourth quarter of 2017, rather than increasing 2.1 percent. Total manufacturing sector productivity increased 4.3 percent in the fourth quarter of 2017, a smaller increase than previously reported. Hourly compensation was revised up 2.3 percentage points; and when combined with the small downward revision to productivity this led to an upward revision to unit labor costs, which rose 0.2 percent rather than decreasing 2.2 percent.

Manufacturing output and all related measures--including labor productivity--were revised back as far as 2008 to incorporate revised BLS measures of sectoral output in manufacturing industries published May 16, 2018 in Multifactor Productivity Trends In Manufacturing - 2016. The period most affected was from 2014 to 2016, with the average annual rate of productivity growth over this period revised down from -0.1 percent to -0.6 percent. The average annual rate of manufacturing productivity growth from 2007 to 2017 was unrevised at 0.7 percent, well below the long-term rate from 1987 to 2017 of 2.7 percent. (See tables 3, 4, and 5, and appendix tables 1, 2, and 3.) For more complete information see www.bls.gov/mfp/sectoraloutputrevisions.htm.

In the nonfinancial corporate sector, productivity rose 1.2 percent in the fourth quarter of 2017 rather than increasing 0.8 percent as previously reported, due solely to an upward revision to output. Annual average productivity in the nonfinancial corporate sector increased 1.0 percent in 2017, the same as the preliminary estimate. Unit profits rose 2.2 percent in the fourth quarter of 2017, rather than the 2.6 percent increase reported May 3. (See table 6.)

Complete annual and quarterly data series can be found on the Productivity and Costs home page: www.bls.gov/lpc/#data.