2021 First 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.

First Quarter 2021, Revised

(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 8.6 percent and hours worked increased 3.0 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 increased at an annual rate of 1.7 percent in the first quarter of 2021, the combined effect of a 7.2-percent increase in hourly compensation and a 5.4-percent increase in productivity. Unit labor costs increased 4.1 percent over the last four quarters, as hourly compensation increased 8.3 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 3.0-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 8.6-percent increase in the first quarter of 2021, is now only 0.5 percent below the level seen in the fourth quarter of 2019. (See table 2.)

Manufacturing sector labor productivity decreased 1.7 percent in the first quarter of 2021, as output increased 1.4 percent and hours worked increased 3.1 percent. Manufacturing productivity increased 1.8 percent from the same quarter a year ago. (See tables A1 and 3.)

Unit labor costs in the total manufacturing sector increased 10.7 percent in the first quarter of 2021, reflecting an 8.9-percent increase in hourly compensation and a 1.7-percent decrease in productivity. Manufacturing unit labor costs increased 5.1 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. These measures have not yet fully recovered from the historic declines of the second quarter of 2020; output and hours remain 2.3 percent and 4.4 percent below their fourth-quarter 2019 levels, respectively. (See table 3.)

Durable goods manufacturing productivity increased 1.1 percent in the first quarter of 2021, reflecting a 5.7-percent increase in output and a 4.6-percent increase in hours worked. Nondurable goods manufacturing productivity decreased 3.7 percent in the first quarter of 2021, as output decreased 3.0 percent and hours worked increased 0.7 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 first-quarter 2021 measures were announced today for the nonfinancial corporate sector. Productivity increased 5.8 percent in the first quarter of 2021 as output increased 8.8 percent and hours worked increased 2.8 percent. Productivity increased 6.5 percent over the last four quarters, which is the largest four-quarter increase since a 7.9-percent increase in the first quarter of 2010. Unit profits of nonfinancial corporations decreased at a 4.7 percent annual rate in the first quarter of 2021 and increased 18.5 percent over the last four quarters, which is the largest four-quarter increase since an 18.8-percent increase in the first quarter of 2012. (See table 6.)

Revised measures

Measures released today are based on more recent source data than were available for the preliminary report. Regular updates of source data from the BLS, the Bureau of Economic Analysis (BEA), and the Board of Governors of the Federal Reserve System are reflected in data for the fourth quarter of 2020 and the first quarter of 2021. Measures of output for the manufacturing sectors incorporate revised annual benchmark data released May 20 by BLS. As a result, quarterly indexes and percent changes for output and related measures were subject to revision from first-quarter 2012 to fourth-quarter 2019.

In the first quarter of 2021, nonfarm business sector productivity increased 5.4 percent, the same as previously reported. Output was revised up 0.2 percentage point and hours worked was revised up 0.1 percentage point. Unit labor costs increased 1.7 percent rather than decreasing 0.3 percent as previously reported, reflecting a 2.1-percentage point upward revision to hourly compensation. In the manufacturing sector, productivity was revised down from a 0.1-percent increase to a 1.7-percent decrease, reflecting a 1.0-percentage point downward revision to output and a 0.8-percentage point upward revision to hours worked. Unit labor costs increased 10.7 percent rather than the preliminary estimate of 4.6 percent.

In the fourth quarter of 2020, labor productivity in the nonfarm business sector decreased at the same 3.8-percent rate reported May 6. Hourly compensation was revised up from the previously reported increase of 1.6 percent to a 9.7-percent increase. As a result, unit labor costs increased 14.0 percent in the fourth quarter of 2020, rather than increasing 5.6 percent. Total manufacturing sector productivity was revised down by 0.1 percentage point to a 4.4 percent increase. Hourly compensation was revised up 13.9 percentage points to a 9.8-percent increase; this led to an upward revision to unit labor costs, which increased 5.1 percent rather than decreasing 8.2 percent.

In the nonfinancial corporate sector, productivity rose 16.7 percent in the fourth quarter of 2020 rather than increasing 11.6 percent as previously reported, due solely to an upward revision to output. Annual average productivity in the nonfinancial corporate sector increased 2.1 percent in 2020, rather than the preliminary estimate of 1.8 percent.

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

Durable Previous quarter 1.1 5.7 4.6 11.7 7.6 10.4 manufacturing A year ago 4.0 0.4 -3.5 7.1 5.1 3.0

Nonfinancial Previous quarter 5.8 8.8 2.8 6.7 2.8 0.8 corporate A year ago 6.5 3.3 -3.0 9.1 7.1 2.4