2018 Second 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.

Second Quarter 2018, Preliminary

Nonfarm business sector labor productivity increased 2.9 percent during the second quarter of 2018, the U.S. Bureau of Labor Statistics reported today, as output increased 4.8 percent and hours worked increased 1.9 percent. (All quarterly percent changes in this release are seasonally adjusted annual rates.) From the second quarter of 2017 to the second quarter of 2018, productivity increased 1.3 percent, reflecting a 3.5-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 decreased 0.9 percent in the second quarter of 2018, reflecting a 2.0-percent increase in hourly compensation and a 2.9-percent increase in productivity. Unit labor costs increased 1.9 percent over the last four quarters. (See tables A1 and 2.)

Historical Revisions to Productivity and Costs Data

Data in this release reflect the 2018 Comprehensive Update of the National Income and Product Accounts (NIPA) released by the Bureau of Economic Analysis of the U.S. Department of Commerce on July 27, 2018. See “Revised measures” section.

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 0.9 percent in the second quarter of 2018, as output increased 1.9 percent and hours worked increased 1.0 percent. Productivity increased 0.9 percent in the durable manufacturing sector, as output rose 2.4 percent and hours worked increased 1.4 percent. In the non-durable goods manufacturing sector, a 1.1-percent increase in productivity reflected a 1.5- percent increase in output and a 0.4-percent increase in hours worked. Over the last four quarters, total manufacturing sector productivity decreased 0.2 percent, as output increased 1.8 percent and hours worked increased 2.1 percent. Unit labor costs in manufacturing rose 0.6 percent in the second quarter of 2018 and increased 2.7 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 first-quarter 2018 measures were announced today for the nonfinancial corporate sector. Productivity increased 3.0 percent in the first quarter of 2018 and increased 2.5 percent over the last four quarters. Unit profits of nonfinancial corporations increased at a 5.5-percent annual rate in the first quarter of 2018 and increased 0.3 percent over the last four quarters. (See tables A2 and 6.)

Revised measures

Measures of output for the business, nonfarm business, and nonfinancial corporate sectors, and measures of compensation for all sectors incorporate revised National Income and Product Accounts (NIPA) data for first-quarter 1947 through first-quarter 2018 released on July 27 by the Bureau of Economic Analysis (BEA), U.S. Department of Commerce. As a result, all measures incorporating output and compensation were revised, including labor productivity and unit labor costs. The revisions affected both annual and quarterly data, with the revisions to quarterly data being more substantial, due to the incorporation of improved historical seasonal adjustment methodology by BEA. Measures of output for the manufacturing sectors incorporate regular updates of source data for the first quarter of 2018 and the fourth quarter of 2017. Hours and related measures were revised back to 2000 for the business and nonfarm business sectors due to revised NIPA data on government enterprises employment and on the proportion of sector compensation paid to employees of nonprofit institutions. Hours and related measures were revised back to 2000 for the nonfinancial corporate sector due to the incorporation of revised NIPA data on the proportion of sector compensation paid to employees of corporations. Indexes of all measures show historical revisions because the base year was changed from 2009 to 2012; resulting revisions to percent changes are small.

Nonfarm business sector productivity increased 0.3 percent in the first quarter of 2018--similar to the previously reported estimate (0.4 percent)--reflecting a 0.1-percentage point downward revision to output. (See table B1.) An upward revision to first-quarter unit labor costs--from an increase of 2.9 percent to an increase of 3.4 percent--reflected a 0.4-percentage point upward revision to hourly compensation and a 0.1-pecentage point downward revision to productivity. Real hourly compensation increased 0.2 percent after revision, rather than decreasing 0.2 percent as previously published.

Historical revisions to labor productivity in the nonfarm business sector affected the full historical period since 1947, with notable periods of upward revision in the latter 1990s and latter 2000s. The average annual rate of productivity growth from 2007 to 2017--representing the current business cycle- -was revised up 0.1 percentage point, to a rate of 1.3 percent. The productivity growth rate over the last business cycle, from 2001 to 2007, was also revised up 0.1 percentage point, to a rate of 2.7 percent. Earlier business cycle trends also remained largely unchanged. Unit labor costs revisions were also for the full historical period since 1947, reflecting both revisions to labor productivity and hourly compensation, and show notable downward revisions in the latter 2000s. There was also a large upward revision in 2017, due to a large upward revision to hourly compensation in that year.

Annual average productivity growth in the nonfarm business sector in 2017 was revised down 0.2 percentage point to an increase of 1.1 percent. Unit labor costs increased 2.2 percent in the nonfarm business sector in 2017, rather than increasing 0.4 percent, reflecting both a 1.7-percentage point upward revision to hourly compensation and a 0.2-percentage point downward revision to productivity. Real hourly compensation increased 1.2 percent in 2017, rather than decreasing 0.5 percent as previously reported. (See table C1.)

Manufacturing sector productivity decreased 1.0 percent in the first quarter of 2018--a smaller decline than previously reported. Productivity was revised up 0.9 percentage point, to an increase of 0.1 percent in the durable goods sector, and was revised down 0.5 percentage point, to a decrease of 1.4 percent in the nondurable goods sector. Unit labor costs increased 5.5 percent in the manufacturing sector rather than increasing 5.2 percent as reported June 6. Unit labor costs were revised down 1.2 percentage points, to an increase of 5.5 percent in the durable goods sector, and were revised up 2.5 percentage points, to an increase of 3.4 percent in the nondurable goods sector. Total manufacturing real hourly compensation increased 0.9 percent, as revised. (See table B1.)

Annual average manufacturing productivity grew 0.7 percent in 2017, unrevised from the previously reported estimate. Productivity was also unrevised in the manufacturing sector in 2016 and 2015. Unit labor costs were revised up to an increase of 2.6 percent in 2017, reflecting a 1.6-percentage point upward revision to hourly compensation. After revision, manufacturing real hourly compensation increased 1.1 percent in 2017 rather than decreasing 0.4 percent. (See tables C1, 3, 4, and 5.)

Nonfinancial corporate sector productivity growth was revised up in the first quarter of 2018, to an increase of 3.0 percent, rather than the previously published increase of 1.9 percent; this revision was due solely to a 1.1-percentage point upward revision to output; hours were unrevised. (See table A2.)

Annual average productivity in the nonfinancial corporate sector increased 1.6 percent in 2017, an upward revision from the preliminary estimate of a 1.0-percent increase. (See tables C1 and 6.) Though the rate over the current business cycle--from 2007 to 2017--increased at the same 1.0-percent rate as was reported June 6, there were notable revisions in some of the years of this period, particularly three consecutive 0.3-percentage point upward revisions, in 2011, 2012, and 2013, followed by a 0.9- percentage point downward revision in 2014.

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

Manufacturing Previous quarter 0.9 1.9 1.0 1.5 -0.1 0.6 A Year ago -0.2 1.8 2.1 2.5 -0.2 2.7 Durable manufacturing Previous quarter 0.9 2.4 1.4 1.3 -0.3 0.4 A year ago 0.2 2.3 2.1 2.9 0.2 2.7 Nondurable manufacturing Previous quarter 1.1 1.5 0.4 1.9 0.2 0.8 A year ago -0.6 1.3 2.0 1.7 -0.9 2.4