2018 Second 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.

Second Quarter 2018, Revised

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 5.0 percent and hours worked increased 2.0 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 1.0 percent in the second quarter of 2018, reflecting a 1.9-percent increase in hourly compensation and a 2.9-percent increase in labor productivity. Unit labor costs increased 1.9 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 1.5 percent in the second quarter of 2018, as output increased 3.0 percent and hours worked increased 1.5 percent. Productivity increased 1.1 percent in the durable manufacturing sector, as output rose 2.9 percent and hours worked increased 1.8 percent. In the non-durable goods manufacturing sector, a 2.2-percent increase in productivity reflected a 3.1- percent increase in output and a 0.9-percent increase in hours worked. Over the last four quarters, total manufacturing sector productivity was unchanged, as output increased 2.1 percent and hours worked increased 2.2 percent. Unit labor costs in manufacturing declined 0.2 percent in the second quarter of 2018 and increased 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 second-quarter 2018 measures of productivity and costs were announced for the nonfinancial corporate sector. Labor productivity decreased 0.7 percent in the second quarter of 2018, as output increased 2.2 percent and hours worked increased 2.9 percent. Unit labor costs increased 2.4 percent, as hourly compensation increased 1.7 percent and productivity decreased 0.7 percent. Unit profits increased at a 19.4-percent annual rate in the second quarter of 2018. (See tables A2 and 6.)

Revised measures

The 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 nonfarm business, business, and manufacturing sectors.

In the second quarter of 2018, nonfarm business productivity increased 2.9 percent--the same as the preliminary estimate; there were small upward revisions to both output and hours worked. The increase in productivity was the largest quarterly gain since the first quarter of 2015 (3.1%), and reflected a 5.0-percent increase in output--the largest since the third quarter of 2014 (6.4%). Unit labor costs decreased 1.0 percent in the second quarter of 2018, a slightly larger decline than previously reported, and the largest since the third quarter of 2014 (-1.5%).

In the second quarter of 2018, manufacturing sector productivity was revised up to an increase of 1.5 percent from a previously-reported increase of 0.9 percent. Unit labor costs decreased 0.2 percent, rather than increasing 0.6 percent as previously reported. Productivity, output, and hours worked were all revised up in both durable goods manufacturing and nondurable goods manufacturing; unit labor costs were revised down.

In the first quarter of 2018, nonfarm business productivity increased at the same 0.3-percent rate reported previously. Unit labor costs were also unrevised, and increased 3.4 percent. Manufacturing sector productivity was revised up slightly to a decrease of 0.8 percent. Unit labor costs increased at the same 5.5-percent rate reported on August 15, reflecting offsetting 0.2-percentage point upward revisions to both hourly compensation and productivity.

In the nonfinancial corporate sector, first-quarter 2018 productivity increased at the same 3.0-percent rate that was previously reported. Unit profits were not revised and increased 5.5 percent. (See tables B2 and 6.)

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