2021 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 2021, Revised

Nonfarm business sector labor productivity increased 2.1 percent in the second quarter of 2021, the U.S. Bureau of Labor Statistics reported today, as output increased 8.1 percent and hours worked increased 6.0 percent. (All quarterly percent changes in this release are seasonally adjusted annual rates.) From the second quarter of 2020 to the second quarter of 2021, nonfarm business sector labor productivity increased 1.8 percent. (See table A1.)

Unit labor costs in the nonfarm business sector increased at an annual rate of 1.3 percent in the second quarter of 2021, reflecting a 3.4-percent increase in hourly compensation and a 2.1-percent increase in productivity. Unit labor costs increased 0.2 percent over the last four quarters, as hourly compensation increased 2.0 percent and productivity increased 1.8 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 second quarter of 2021 is the fourth consecutive quarter with increases in both output and hours worked, following historic declines in those measures in the second quarter of 2020. Over the past four quarters, nonfarm business sector output increased 15.8 percent and hours worked increased 13.7 percent. The output index is now 1.3 percent above the level seen in the fourth quarter of 2019, the last quarter not affected by the COVID-19 pandemic, while the hours worked index remains 2.7 percent below its fourth quarter 2019 level. (See tables A1 and 2.)

Manufacturing sector labor productivity increased 8.0 percent in the second quarter of 2021, as output increased 5.5 percent and hours worked decreased 2.3 percent. Although productivity also increased in both manufacturing subsectors, these gains reflected different underlying conditions. In the durable manufacturing sector, productivity increased 4.6 percent as a 0.9-percent decrease in output was outpaced by a 5.2-percent decrease in hours worked. In contrast, nondurable manufacturing sector productivity increased 10.0 percent as output (12.9 percent) grew faster than hours worked (2.7 percent); the output gain was driven primarily by the chemical products manufacturing industry. The second- quarter increase in nondurable manufacturing sector productivity was the largest since the first quarter of 2003, when productivity also increased 10.0 percent. Total manufacturing sector productivity increased 7.2 percent from the same quarter a year ago. (See tables A1, 3, 4, and 5.)

Unit labor costs in the total manufacturing sector decreased 3.0 percent in the second quarter of 2021, reflecting a 4.7-percent increase in hourly compensation and an 8.0-percent increase in productivity. Manufacturing unit labor costs decreased 6.1 percent from the same quarter a year ago. (See tables A1 and 3.)

Manufacturing sector output increased 17.1 percent over the last four quarters and is now just 0.3 percent below its level in the fourth quarter of 2019, the last quarter not affected by the COVID-19 pandemic. While hours worked in manufacturing increased 9.3 percent over the last four quarters, they remain 4.8 percent below the fourth-quarter 2019 level. (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.

Preliminary second-quarter 2021 measures were announced today for the nonfinancial corporate sector. Productivity decreased 4.0 percent in the second quarter of 2021 as output increased 0.7 percent and hours worked increased 4.9 percent. Productivity increased 3.8 percent over the last four quarters. Unit profits of nonfinancial corporations increased at a 48.7-percent annual rate in the second quarter of 2021 and increased 41.9 percent over the last four quarters, which is the largest four-quarter increase since a 42.7-percent increase in the third quarter of 2010. (See table 6.)

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 business, nonfarm business, and manufacturing sectors for the second quarter of 2021.

In the second quarter of 2021, nonfarm business sector productivity increased 2.1 percent--a 0.2- percentage point downward revision from the preliminary estimate of 2.3 percent--due to a 0.2- percentage point upward revision to output and a 0.5-percentage point upward revision to hours worked. Unit labor costs increased 1.3 percent rather than increasing 1.0 percent as previously reported, the combined effect of a 0.1-percentage point upward revision to hourly compensation and a 0.2-percentage point downward revision to productivity.

Manufacturing sector productivity for the second quarter of 2021 was revised up to an increase of 8.0 percent from a previously reported increase of 6.9 percent. This revision stems mainly from nondurable manufacturing sector productivity, which increased 10.0 percent instead of the previously reported increase of 7.8 percent; durable manufacturing sector productivity was unchanged from the previously reported increase of 4.6 percent. Total manufacturing unit labor costs decreased 3.0 percent in the second quarter of 2021 rather than decreasing 1.9 percent as previously reported.

In the first quarter of 2021, nonfarm business sector productivity and unit labor costs were not revised. Manufacturing sector productivity was revised up 0.4 percentage point to a decrease of 0.9 percent. As a result, unit labor costs were revised down 0.4 percentage point to an increase of 1.5 percent. In the nonfinancial corporate sector, first-quarter 2021 productivity, unit labor costs, and unit profits were not revised. (See table 6.)

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