2018 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 2018, Revised

Nonfarm business sector labor productivity increased 1.9 percent in the fourth quarter of 2018, the U.S. Bureau of Labor Statistics reported today, as output increased 3.1 percent and hours worked increased 1.2 percent. (All quarterly percent changes in this release are seasonally adjusted annual rates.) From the fourth quarter of 2017 to the fourth quarter of 2018, productivity increased 1.8 percent, reflecting a 3.7-percent increase in output and a 1.9-percent increase in hours worked. (See tables A1 and 2.) Annual average productivity increased 1.3 percent from 2017 to 2018. (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 2.0 percent in the fourth quarter of 2018, and increased 1.0 percent over the last four quarters. (See tables A1 and 2.)

New and Revised Productivity and Costs Data

This is the first publication of fourth quarter and annual average 2018 measures of labor productivity and costs for the business and nonfarm business sectors, reflecting the Feb. 28, 2019 release of source data on output and compensation by the U.S. Department of Commerce. Also, data in this release reflect the annual benchmark revision of BLS Current Employment Statistics program data on private nonfarm employment and hours, and historical revision 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 2.0 percent in the fourth quarter of 2018, as output increased 2.7 percent and hours worked rose 0.8 percent. Productivity increased 3.3 percent in the durable manufacturing sector and 1.9 percent in the nondurable manufacturing sector in the fourth quarter of 2018. Over the last four quarters, total manufacturing sector productivity increased 1.0 percent, as output increased 2.9 percent and hours worked increased 1.9 percent. Unit labor costs in manufacturing increased 2.2 percent in the fourth quarter of 2018 and rose 0.8 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

The measures released today are based on more recent source data than were available for the preliminary report.

Fourth-quarter and annual average 2018 data on output and compensation were published for the first time on February 28, 2019 by the Bureau of Economic Analysis, U.S. Department of Commerce. Therefore, measures based on these data--including productivity and unit labor costs--are published for the first time with this release.

Quarterly and annual measures of hours and related series--including productivity--were revised from 1947 forward for all sectors. These data were revised due to incorporation of revised Current Employment Statistics (CES) program data on employment and hours published February 1, 2019. Quarterly measures of real hourly compensation for all sectors were revised from first-quarter 2018 forward to reflect revised data on consumer prices from the BLS Office of Prices and Living Conditions.

In the fourth quarter of 2018, manufacturing sector productivity was revised up to 2.0 percent from a preliminary estimate of 1.3 percent. The upward revision reflected both an upward revision to output and a downward revision to hours worked. Productivity was also revised up in durable goods manufacturing to 3.3 percent and in nondurable goods industries to 1.9 percent.

In the third quarter of 2018, nonfarm business productivity was revised down from an increase of 2.2 percent to an increase of 1.8 percent due to an upward revision to hours worked; output was unrevised. Unit labor costs were revised up 0.7 percentage point to an increase of 1.6 percent, the combined effect of the 0.4-percentage point downward revision to productivity and a 0.3-percentage point upward revision to hourly compensation.

Manufacturing productivity increased 1.0 percent rather than 1.1 percent in the third quarter of 2018, as hours worked were revised up slightly more than output. Unit labor costs in manufacturing were revised upward and increased 1.8 percent rather than declining 1.3 percent, due almost entirely to a 3.0- percentage point upward revision to hourly compensation. (See table B2.)

Nonfinancial corporate sector productivity increased 6.1 percent in the third quarter of 2018, the same rate as previously reported. Both output and hours were revised up 0.5 percentage point. Unit labor costs decreased 2.3 percent in the third quarter of 2018, a slightly smaller decline than previously reported. (See table A2.)

Annual averages

Unit labor costs in the nonfarm business sector increased 1.4 percent in 2018, reflecting increases of 2.7 percent in hourly compensation and 1.3 percent in productivity. Real hourly compensation, which takes into account changes in consumer prices, increased 0.3 percent in 2018.

In the manufacturing sector, productivity increased 0.8 percent in 2018, as output increased 2.7 percent and hours worked increased 1.9 percent. Manufacturing sector productivity has grown less than 1.0 percent in each of the last 8 years. The average annual rate of manufacturing productivity growth from 2007 to 2018 is 0.7 percent, well below the long-term rate from 1987 to 2018 of 2.6 percent. Unit labor costs increased 0.9 percent in 2018.

Quarterly and annual data for all sectors from 2016 to 2018 appear in tables 1-6. Full historical measures can be found at: www.bls.gov/lpc/#data.

Manufacturing Previous quarter 2.0 2.7 0.8 4.3 2.7 2.2 A Year ago 1.0 2.9 1.9 1.8 -0.4 0.8 Durable manufacturing Previous quarter 3.3 6.1 2.7 4.1 2.6 0.7 A year ago 1.5 4.5 3.0 1.6 -0.6 0.2 Nondurable manufacturing Previous quarter 1.9 -0.7 -2.5 4.1 2.6 2.1 A year ago 1.3 1.3 0.0 1.8 -0.4 0.6

Nonfarm business Revised 1.9 3.1 1.2 3.9 2.4 2.0 Previously published N.A. N.A. 1.6 N.A. N.A. N.A.

Business Revised 1.8 3.2 1.3 3.6 2.1 1.8 Previously published N.A. N.A. 1.7 N.A. N.A. N.A.

Manufacturing Revised 2.0 2.7 0.8 4.3 2.7 2.2 Previously published 1.3 2.3 1.0 N.A. N.A. N.A.

Durable Revised 3.3 6.1 2.7 4.1 2.6 0.7 manufacturing Previously published 2.6 5.7 3.0 N.A. N.A. N.A.

Nondurable Revised 1.9 -0.7 -2.5 4.1 2.6 2.1 manufacturing Previously published 1.2 -1.2 -2.4 N.A. N.A. N.A.