2020 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 2020, Revised

Nonfarm business sector labor productivity increased 10.1 percent in the second quarter of 2020, the U.S. Bureau of Labor Statistics reported today, as output decreased 37.1 percent and hours worked decreased 42.9 percent. (All quarterly percent changes in this release are seasonally adjusted annual rates, and show what the percent change would be if the quarterly rate continued for four quarters.)

The 10.1-percent increase in nonfarm business sector labor productivity in the second quarter of 2020 is the largest quarterly increase since the first quarter of 1971, when output per hour increased 12.3 percent. The declines in both output and hours worked in the second quarter of 2020 were the largest in these series, which begin with data for first-quarter 1947. From the second quarter of 2019 to the second quarter of 2020, productivity increased 2.8 percent, reflecting an 11.2-percent decrease in output and a 13.6-percent decrease in hours worked. (See table A1.)

Unit labor costs in the nonfarm business sector increased at an annual rate of 9.0 percent in the second quarter of 2020, as a 20.0-percent increase in hourly compensation outpaced the 10.1-percent increase in productivity. Unit labor costs increased 9.6 percent in the first quarter of 2020, and 4.9 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 labor productivity tend to reduce unit labor costs.

The 20.0-percent increase in hourly compensation in the second quarter of 2020 was the largest increase in the series which begins in 1947. Also, the labor share--defined as the percentage of current-dollar output that accrues to workers in the form of compensation--increased to 59.8 percent in the second quarter of 2020, the highest level since the fourth quarter of 2008 (60.1 percent).

Manufacturing sector labor productivity decreased at a 14.6 percent annual rate in the second quarter of 2020, as output fell 47.0 percent and hours worked dropped 38.0 percent. These were the largest quarterly declines in each of these series, which begin with data for 1987. Total manufacturing sector productivity declined 3.7 percent over the last four quarters, as output decreased 15.7 percent and hours worked decreased 12.4 percent. For the second quarter of 2020, durable manufacturing saw a 26.9- percent decrease in productivity, reflecting a 57.9-percent decrease in output and a 42.4-percent decrease in hours worked. Nondurable manufacturing saw a 5.1-percent decrease in productivity, as output decreased 33.5 percent and hours worked decreased 30.0 percent. (See tables A1, 3, 4, 5.)

Unit labor costs in the total manufacturing sector increased 29.1 percent in the second quarter of 2020, and increased 8.9 percent from the same quarter a year ago. The increase in unit labor costs in the second quarter of 2020 was the largest increase in the series for total manufacturing, as were unit labor cost increases in the durable manufacturing and nondurable manufacturing sectors. (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.

Nonfinancial corporate sector labor productivity increased at a 3.1-percent annual rate in the second quarter of 2020 as output fell 39.3 percent and hours worked fell 41.1 percent. Both the output and the hours worked declines were the largest in these series, which begin in 1947. Since the second quarter of 2019, labor productivity in the nonfinancial corporate sector has increased 0.9 percent.

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 2020, nonfarm business sector productivity increased 10.1 percent--a 2.8- percentage point upward revision from the preliminary estimate of 7.3 percent--mainly due to a 1.8- percentage point upward revision to output. Unit labor costs increased 9.0 percent, a smaller increase than previously reported (12.2 percent). This downward revision is largely due to the 2.8-percentage point upward revision to productivity; the remaining revision comes from hourly compensation being revised down 0.4 percentage point, from a 20.4-percent increase to a 20.0-percent increase.

Manufacturing sector productivity for the second quarter of 2020 was revised up to a decrease of 14.6 percent from a previously-reported decrease of 15.5 percent. Durable manufacturing productivity was also revised up, to a decline of 26.9 percent; nondurable manufacturing productivity was revised down slightly, to a decline of 5.1 percent. Total manufacturing unit labor costs increased 29.1 percent in the second quarter of 2020, rather than increasing 31.1 percent as previously reported.

In the first quarter of 2020, nonfarm business productivity was not revised. Unit labor costs were revised down slightly to an increase of 9.6 percent. Manufacturing sector productivity was revised up 0.1-percentage point to an increase of 1.7 percent. Unit labor costs were revised down to an increase of 4.2 percent. In the nonfinancial corporate sector, first-quarter 2020 productivity was revised down 0.1- percentage point, to an increase of 0.2 percent. Unit profits were revised up 0.1-percentage point, to a decline of 44.1 percent. (See table 6.)

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

Coronavirus (COVID-19) Pandemic Impact on Productivity Data

BLS quarterly estimates of labor productivity combine output data with hours worked data based primarily on BLS Current Employment Statistics (CES) survey and supplemented with data from the Current Population Survey (CPS). The March reference period for these surveys 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 employment and hours using supplementary data. Hours worked and related measures--including labor productivity--for the first quarter of 2020 reflect these adjustments.

Given the continued rapid changes in the economy, BLS explored the possibility of adjusting second quarter (Q2) estimates. BLS compared several adjustment methods for Q2 and found that the economic movements between April and June tended to be offsetting, resulting in Q2 results that were similar to the usual methodology. Therefore no adjustments were made to Q2. For more information see www.bls.gov/covid19/productivity-and-costs-covid19-impacts-second-quarter-2020-preliminary.htm.