2021 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 2021, Preliminary

(NOTE: This release was reissued on July 20, 2021, due to errors in the first quarter 2021 estimates of hours worked for the business, manufacturing, and nonfinancial corporate sectors. The error in hours worked resulted in errors to related measures, including labor productivity. Estimates in this news release will not be corrected. Corrected data are available at www.bls.gov/bls/errata/corrected-hours-worked-and-labor-productivity-for-labor-productivity-and-costs-2021-Q1.htm.)

Nonfarm business sector labor productivity increased 5.4 percent in the first quarter of 2021, the U.S. Bureau of Labor Statistics reported today, as output increased 8.4 percent and hours worked increased 2.9 percent. (All quarterly percent changes in this release are seasonally adjusted annual rates.) From the first quarter of 2020 to the first quarter of 2021, nonfarm business sector labor productivity increased 4.1 percent, reflecting a 1.1-percent increase in output and a 2.9-percent decline in hours worked. (See table A1.)

Unit labor costs in the nonfarm business sector decreased at an annual rate of 0.3 percent in the first quarter of 2021, the combined effect of a 5.1-percent increase in hourly compensation and a 5.4-percent increase in productivity. Unit labor costs increased 1.6 percent over the last four quarters, as hourly compensation increased 5.8 percent and productivity increased 4.1 percent. (See table A1.) 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 productivity tend to reduce them.

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. The first quarter of 2021 is the third consecutive quarter with increases in both output and hours worked, following historic declines in those measures in the second quarter of 2020. With the 2.9-percent increase in the first quarter of 2021, the hours worked index is 4.3 percent lower than it was in the fourth quarter of 2019, the last quarter not affected by the COVID-19 pandemic. Output, however, with the 8.4-percent increase in the first quarter of 2021, is now only 0.6 percent below the level seen in the fourth quarter of 2019. (See table 2.)

Manufacturing sector labor productivity increased 0.1 percent in the first quarter of 2021, as output increased 2.4 percent and hours worked increased 2.3 percent. Manufacturing productivity increased 2.2 percent from the same quarter a year ago. (See tables A1 and 3.)

Unit labor costs in the total manufacturing sector increased 4.6 percent in the first quarter of 2021, reflecting a 4.6-percent increase in hourly compensation and a 0.1-percent increase in productivity. Manufacturing unit labor costs increased 0.1 percent from the same quarter a year ago. (See tables A1 and 3.)

Following strong growth in the fourth quarter of 2020, manufacturing output and hours worked saw more modest growth rates in the first quarter of 2021. As such, these measures have not yet fully recovered from the historic declines of the second quarter of 2020; output and hours remain 2.0 percent and 4.6 percent below their fourth-quarter 2019 levels, respectively. (See table 3.)

Durable goods manufacturing productivity increased 0.7 percent in the first quarter of 2021, reflecting a 4.6-percent increase in output and a 3.9-percent increase in hours worked. Nondurable goods manufacturing productivity increased 0.3 percent in the first quarter of 2021, as output increased 0.1 percent and hours worked decreased 0.2 percent. (See tables A1, 4, and 5.)

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 2020 measures were announced today for the nonfinancial corporate sector. Productivity increased 11.6 percent in the fourth quarter of 2020 as output increased 23.1 percent and hours worked increased 10.3 percent. The 11.6-percent increase is the largest quarterly increase in nonfinancial corporate sector productivity since the second quarter of 1975 when the measure increased 11.7 percent. Nonfinancial corporate sector productivity increased 3.9 percent over the last four quarters. Annual average productivity increased 1.8 percent from 2019 to 2020. (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. Indexes were subject to revision back to 1996; resulting revisions to percent changes were small. Measures of real hourly compensation for all sectors also were revised from 2016 forward due to the incorporation of the revised Consumer Price Index Retroactive Series.

In the fourth quarter of 2020, nonfarm business sector productivity was revised up 0.4 percentage point to a decrease of 3.8 percent, reflecting a 0.3-percentage point upward revision to output and a 0.1- percentage point downward revision to hours worked. Conversely, nonfarm business unit labor costs were revised down 0.4 percentage point to an increase of 5.6 percent. Total manufacturing sector productivity was revised down to an increase of 4.5 percent in the fourth quarter of 2020, reflecting a 0.6-percentage point downward revision to output. Unit labor costs in the manufacturing sector were revised up 0.6 percentage point to a decrease of 8.2 percent during the fourth quarter of 2020. Labor productivity was revised down 0.9 percentage point in the durable manufacturing sector to an increase of 5.5 percent, and was also revised down 0.4 percentage point in the nondurable manufacturing sector to an increase of 2.4 percent. (See table B1.)

Annual average rates of productivity growth in the nonfarm business and manufacturing sectors were not revised for 2020, and remain at 2.5 percent and 0.3 percent, respectively. (See tables 2 and 3.)

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.

Manufacturing Previous quarter 0.1 2.4 2.3 4.6 0.9 4.6 A Year ago 2.2 -0.6 -2.8 2.4 0.5 0.1 Durable manufacturing Previous quarter 0.7 4.6 3.9 6.2 2.4 5.5 A year ago 3.9 0.1 -3.7 1.4 -0.5 -2.4 Nondurable manufacturing Previous quarter 0.3 0.1 -0.2 1.6 -2.1 1.2 A year ago 0.1 -1.4 -1.4 4.4 2.5 4.4