2019 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 2019, Preliminary

Nonfarm business sector labor productivity increased 2.3 percent in the second quarter of 2019, the U.S. Bureau of Labor Statistics reported today, as output increased 1.9 percent and hours worked decreased 0.4 percent. (All quarterly percent changes in this release are seasonally adjusted annual rates.) From the second quarter of 2018 to the second quarter of 2019, productivity increased 1.8 percent, reflecting a 2.6-percent increase in output and a 0.8-percent increase in hours worked. (See table A1.)

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 2.4 percent in the second quarter of 2019, and increased 2.5 percent over the last four quarters. (See table 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.

Historical Revisions to Productivity and Costs Data

Data in this release reflect the 2019 Annual 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 26, 2019. See “Revised measures” section.

Manufacturing sector labor productivity decreased 1.6 percent in the second quarter of 2019, as output decreased 2.1 percent and hours worked declined 0.5 percent. Productivity declined 0.9 percent in the durable manufacturing sector, reflecting a 1.8-percent decrease in output and a 0.9-percent decrease in hours worked. Productivity decreased 2.6 percent in the nondurable manufacturing sector as output fell 2.4 percent and hours worked rose 0.3 percent. Over the last four quarters, total manufacturing sector productivity increased 0.2 percent, as output increased 0.4 percent and hours worked increased 0.2 percent. Unit labor costs in the manufacturing sector increased 5.8 percent in the second quarter of 2019, and increased 4.3 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.

Revised first-quarter 2019 measures were announced today for the nonfinancial corporate sector. Productivity increased 1.5 percent in the first quarter of 2019 and increased 1.1 percent over the last four quarters. Unit labor costs increased 7.2 percent in the first quarter of 2019 and 1.4 percent from the same quarter last year. Unit profits of nonfinancial corporations fell at a 33.6-percent annual rate in the first quarter of 2019 and decreased 5.9 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 2014 through first-quarter 2019 released on July 26 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. Current dollar output and the implicit price deflators for the business and nonfarm business sectors were also subject to further revisions back to 1947 due to rounding. Measures of output for the manufacturing sectors incorporate regular updates of source data for the first quarter of 2019 and the fourth quarter of 2018.

Measures of hours worked for all sectors incorporate regular updates of source data for the first quarter of 2019. Hours worked and related measures were revised back to 2003 for all sectors due to incorporation of revised ratios of supervisory and nonproduction worker average weekly hours to production and non-supervisory worker average weekly hours. Hours worked and related measures were revised back to 2010 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 worked 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. Because hours worked were revised for the index base year of 2012, all measures incorporating hours worked--including productivity--were subject to revision back to 1947; resulting revisions to percent changes are small.

Nonfarm business sector productivity increased 3.5 percent in the first quarter of 2019--similar to the previously reported estimate (3.4 percent)--reflecting a 0.1-percentage point downward revision to hours worked. (See table B1.) A large upward revision to first-quarter unit labor costs--from a decrease of 1.6 percent to an increase of 5.5 percent--reflected a 7.4-percentage point upward revision to hourly compensation and a 0.1-percentage point upward revision to productivity. Hourly compensation increased at a 9.2-percent annual rate in the first quarter of 2019, and real hourly compensation increased 8.3 percent--the largest quarterly gain since the fourth quarter of 2008 (14.3 percent).

Annual average productivity increased 1.3 percent in the nonfarm business sector in 2018 and 2017, and increased 0.3 percent in 2016. The average annual rate of productivity growth from 2007 to 2018-- representing the current business cycle--was unchanged at 1.3 percent. Unit labor costs increased 1.8 percent in the nonfarm business sector in 2018, rather than increasing 1.2 percent, due to a 0.5- percentage point upward revision to hourly compensation. Unit labor costs were revised down by 0.1 percentage point in both 2017 and 2016. (See table C1.)

Manufacturing sector productivity was revised up and increased 1.1 percent in the first quarter of 2019, as output declined less, and hours worked declined more, than previously reported. Productivity was also revised up in both the durable and nondurable manufacturing subsectors. In the first quarter of 2019, total manufacturing unit labor costs increased 6.8 percent rather than increasing 2.0 percent as reported June 6, as a 5.6-percentage point upward revision to hourly compensation was partially offset by a 0.7-percentage point upward revision to productivity. (See table B1.) Total manufacturing real hourly compensation increased 7.1 percent in first-quarter 2019--the largest increase since the second quarter of 2009 (8.0 percent).

Annual average manufacturing productivity grew 0.7 percent in 2018, slightly less than previously reported, and was unrevised in 2017 and 2016. The average annual rate of manufacturing productivity growth from 2007 to 2018 also was unrevised at 0.7 percent. An upward revision to unit labor costs of 0.6 percentage point in 2018 reflected a similar upward revision to hourly compensation. Revisions to 2017 and 2016 unit labor costs were small. (See tables C1, 3, 4, and 5.)

Nonfinancial corporate sector productivity growth was revised up in the first quarter of 2019, to an increase of 1.5 percent, rather than the previously published decline of 0.4 percent. This revision was due solely to a 1.9-percentage point upward revision to output; hours worked were unrevised. Unit labor costs in the nonfinancial corporate sector were revised to an increase of 7.2 percent from a preliminary estimate of 2.0 percent, as a large upward revision to hourly compensation was partially offset by an upward revision to productivity. (See table A2.) Unit profits were revised downward for the first quarter of 2019, and fell 33.6 percent rather than falling 17.9 percent as previously reported. Historical revisions to nonfinancial corporate sector productivity due to the Annual Update of the NIPA were larger than for other major sectors. Fourth-quarter 2018 productivity growth was unrevised at 1.4 percent as a downward revision to output was offset by a downward revision to hours, but productivity was revised down along with output in each of the previous six quarters. (See table 6.).

Annual average productivity in the nonfinancial corporate sector was revised downward in each of the last three years: from a 2.0-percent increase to a 0.2-percent decline in 2018; from a 1.7-percent increase to a 0.3-percent increase in 2017; and from no change to a decline of 1.1 percent in 2016. (See tables C1 and 6.) The average annual rate of productivity growth in the nonfinancial corporate sector from 2015 to 2018 was revised down from a 1.2-percent increase to a decline of 0.3 percent. The revisions to productivity were due primarily to downward revisions to profits, which are a component of output for this sector. Over the same 2015-2018 period profits were revised from a 2.0-percent increase to a 2.1-percent decrease.

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