2020 First 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.

First Quarter 2020, Preliminary

Nonfarm business sector labor productivity decreased 2.5 percent in the first quarter of 2020, the U.S. Bureau of Labor Statistics reported today, as output decreased 6.2 percent and hours worked decreased 3.8 percent. (All quarterly percent changes in this release are seasonally adjusted annual rates.) From the first quarter of 2019 to the first quarter of 2020, productivity increased 0.3 percent, reflecting a 0.1- percent increase in output and a 0.2-percent decrease in hours worked. (See table A1.)

Unit labor costs in the nonfarm business sector increased 4.8 percent in the first quarter of 2020, as hourly compensation increased 2.2 percent and productivity decreased 2.5 percent. Unit labor costs increased 1.5 percent over the last four quarters. (See table 2.)

Coronavirus (COVID-19) impact on First Quarter 2020 Productivity Data

BLS quarterly estimates of labor productivity combine output data with hours worked data based primarily on the Current Employment Statistics (CES) survey. The reference period for the CES largely predated many of the COVID-19-related job losses that occurred in the latter part of March. To capture these job losses, adjustments were made to March employment, based on the Department of Labor’s Employment and Training Administration weekly reports of the number of initial claims for unemployment insurance benefits. Hours and related measures--including labor productivity--for the first quarter of 2020 reflect these adjustments. For more information see www.bls.gov/bls/productivity- and-costs-adjusting-march-2020-employment-and-hours-to-account-for-effects-of-covid-19.htm.

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. 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.

The 2.5-percent decline in nonfarm business sector labor productivity in the first quarter of 2020 was the largest quarterly decline since the fourth quarter of 2015, when output per hour decreased 2.9 percent. It reflects the largest decline in output since the first quarter of 2009 (-6.5 percent) and the largest decline in hours worked since the third quarter of 2009 (-4.4 percent). Productivity had increased in 15 of the 16 quarters between fourth-quarter 2015 and first-quarter 2020.

Manufacturing sector labor productivity decreased 3.3 percent in the first quarter of 2020, as output decreased 7.1 percent and hours worked decreased 3.9 percent. Total manufacturing sector productivity declined 1.7 percent over the last four quarters, as output decreased 2.4 percent and hours worked decreased 0.7 percent. (See tables A1 and 3.) Productivity decreased 8.3 percent in the durable manufacturing sector in the first quarter of 2020, reflecting an 11.9-percent decrease in output and a 3.9- percent decrease in hours worked. Productivity increased 2.1 percent in the nondurable manufacturing sector, as output decreased 1.8 percent and hours worked decreased 3.8 percent. (See tables A1, 4, and 5.) Unit labor costs in the total manufacturing sector increased 3.6 percent in the first quarter of 2020, and increased 2.9 percent from the same quarter a year ago. (See table A1.)

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 fourth-quarter and annual 2019 measures were announced today for the nonfinancial corporate sector. Productivity increased 2.8 percent in the fourth quarter of 2019 and increased 1.7 percent over the last four quarters. Annual average productivity increased 1.8 percent from 2018 to 2019. The historical average annual rate of productivity growth in the nonfinancial corporate sector between 1947 and 2019 is 2.1 percent. (See tables A2, C1, and 6.)

Revised measures

Hours and related measures for all sectors were revised to incorporate updated ratios of hours worked to hours paid by detailed industry, provided by the BLS National Compensation Survey. Percent changes were affected back to 2015 but revisions were small. Measures of real hourly compensation for all sectors also were revised from 2015 forward due to incorporation of the revised Consumer Price Index Research Series Using Current Methods.

In the fourth quarter of 2019, nonfarm business sector productivity increased 1.2 percent, output increased 2.4 percent, and hours worked increased 1.2 percent; the same rates reported March 5. Nonfarm business unit labor costs were also not revised, increasing 0.9 percent. Total manufacturing sector productivity decreased 0.7 percent in the fourth quarter of 2019, a slightly smaller decline than previously reported. Unit labor costs in the manufacturing sector increased 3.5 percent during the fourth quarter, slightly less than previously reported. Labor productivity was revised down slightly in the durable manufacturing sector to a decrease of 1.0 percent, and was revised up in the nondurable manufacturing sector to a decrease of 1.0 percent. (See table B1.)

Annual average rates of productivity growth in the nonfarm business and manufacturing sectors were not revised for 2019. (See table 2.)

Quarterly and annual data for all sectors for recent years appear in tables 1-6. Full historical annual and quarterly measures can be found at www.bls.gov/lpc/#data.

Nonfinancial Previous quarter 2.8 4.1 1.2 2.4 0.0 -0.4 corporate A year ago 1.7 2.6 0.9 3.6 1.5 1.8