2021 Fourth 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.

Fourth Quarter and Annual Averages 2021, Revised

Nonfarm business sector labor productivity increased 6.6 percent in the fourth quarter of 2021, the U.S. Bureau of Labor Statistics reported today, as output increased 9.1 percent and hours worked increased 2.4 percent. (All quarterly percent changes in this release are seasonally adjusted annual rates.) From the fourth quarter of 2020 to the fourth quarter of 2021, nonfarm business sector labor productivity increased 1.9 percent. (See table A1.) Annual average productivity increased 1.9 percent from 2020 to 2021. (See table C1.)

Unit labor costs in the nonfarm business sector increased 0.9 percent in the fourth quarter of 2021, reflecting a 7.5-percent increase in hourly compensation and a 6.6-percent increase in productivity. Unit labor costs increased 3.5 percent over the last four quarters. (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.

Historical Revisions to Productivity and Costs Data

Data in this release incorporate the annual benchmark revision of BLS Current Employment Statistics program data on employment and hours of employees on nonfarm payrolls. Data also include revised employment and hours of all other business sector workers that reflect updated seasonal adjustment of those data by the BLS Major Sector Productivity program. See Revised measures.

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. In the fourth quarter of 2021, both output and hours worked increased for the sixth consecutive quarter following historic declines in those measures in the second quarter of 2020. The fourth-quarter 2021 output index is 4.1 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 0.4 percent below its fourth quarter 2019 level. (See tables A1 and 2.)

The nonfarm business sector labor productivity index is 4.6 percent higher in the fourth quarter of 2021 than it was in the fourth quarter of 2019, corresponding to an annual growth rate of 2.3 percent during the pandemic so far. This rate is higher than the 1.4-percent average annual growth rate during the previous business cycle--from 2007 to 2019--and slightly above the long-term average rate since 1947 of 2.1 percent.

Manufacturing sector labor productivity decreased 0.1 percent in the fourth quarter of 2021; output and hours worked both increased 5.8 percent. In the durable manufacturing sector, productivity increased 2.8 percent, with a 6.9-percent increase in output and a 4.0-percent increase in hours worked. Nondurable manufacturing sector productivity decreased 4.0 percent, as 4.5-percent growth in output was outpaced by 8.8-percent growth in hours worked. Total manufacturing sector productivity increased 1.3 percent from the same quarter a year ago. (See tables A1, 3, 4, and 5.)

Manufacturing sector output is now 2.1 percent above its level in the fourth quarter of 2019, the last quarter not affected by the COVID-19 pandemic. Hours worked in manufacturing remain 2.3 percent below the fourth-quarter 2019 level. The manufacturing labor productivity index is 4.5 percent higher in fourth-quarter 2021 than in fourth-quarter 2019, corresponding to an annual labor productivity growth rate of 2.2 percent during that period. This rate is much higher than the 0.2-percent average annual growth rate during the previous business cycle—from 2007 to 2019—but is just below the long-term rate of 2.3 percent per year from 1987 to 2021. (See tables A1 and 3.)

Unit labor costs in the total manufacturing sector increased 1.4 percent in the fourth quarter of 2021, reflecting a 1.3-percent increase in hourly compensation and a 0.1-percent decrease in productivity. Manufacturing unit labor costs increased 1.5 percent from the same quarter a year ago. (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.

Revised measures

Quarterly and annual measures of hours worked and related series--including productivity--were revised for all major sectors. From 1990 to 2021, the revisions reflect revised BLS Current Employment Statistics (CES) program data for employment and hours of employees on nonfarm payrolls, due to annual benchmarking of CES data and revised seasonal adjustment of those data. Revisions from 2017 to 2021 reflect revised seasonal adjustment of hours worked by nonfarm proprietors and unpaid family workers, all farm workers, and employees of government enterprises. These measures, based on source data from the BLS Current Population Survey (CPS), are seasonally adjusted by the BLS Major Sector Productivity program. Revisions to hours worked in all sectors also incorporate data from the 2017 Economic Census on the proportion of employment in tax exempt establishments and in corporations; data were subject to revision back to 2006. Because hours worked were revised for the index base year of 2012, all measures incorporating hours worked including productivity were subject to revision back to 1947; resulting revisions to percent changes are small.

Quarterly measures of real hourly compensation in 2021 were revised to reflect revised data from the BLS Consumer Price Index program. In addition, third quarter, fourth quarter, and annual average data for 2021 were revised to incorporate regular updates of source data on output and compensation.

Revised and previous measures for the fourth quarter of 2021 are shown in table B1 for the business, nonfarm business, and manufacturing sectors. In the fourth quarter of 2021, nonfarm business productivity was not revised, increasing at the same 6.6-percent rate that was previously reported. Unit labor costs were revised up, from an increase of 0.3 percent to an increase of 0.9 percent, reflecting a 0.6-percentage point upward revision to hourly compensation to an increase of 7.5 percent. When a revised 7.9-percent increase in consumer prices in fourth-quarter 2021 is taken into account, real hourly compensation declined 0.3 percent.

Manufacturing productivity decreased 0.1 percent in the fourth quarter of 2021, rather than decreasing 0.8 percent as reported February 3, as an upward revision to output was larger than an upward revision to hours worked. A 2.1-percentage point downward revision to hourly compensation and the 0.7- percentage point upward revision to productivity both contributed to a downward revision to unit labor costs, which increased 1.4 percent rather than 4.2 percent as previously reported. Productivity was revised up 2.0 percentage points in the durable manufacturing sector and was revised down 0.3 percentage point in the nondurable manufacturing sectors. (See table B1.)

In the third quarter of 2021, nonfarm business productivity was revised up to a decline of 3.9 percent due to a downward revision to hours worked; output was not revised. Unit labor costs increased 10.6 percent rather than 9.3 percent as previously reported, as a 2.3-percentage point upward revision to hourly compensation was greater than the 1.1-percentage point upward revision to productivity. In all manufacturing sectors, productivity was revised up slightly. In the total manufacturing sector, unit labor costs were revised down to an increase of 1.7 percent--lower than a preliminary estimate of 5.5 percent-- with a large downward revision in unit labor costs in durable manufacturing and a large upward revision in nondurable manufacturing unit labor costs. (See table B2.)

Nonfinancial corporate sector productivity increased 1.8 percent in the third quarter of 2021 rather than decreasing 0.8 percent as previously reported, reflecting a 1.5-percentage point upward revision to output and a 1.2-percentage point downward revision to hours worked. (See table A2.)

Annual averages

Unit labor costs in the nonfarm business sector increased 3.5 percent in 2021, reflecting increases of 5.4 percent in hourly compensation and 1.9 percent in productivity. Real hourly compensation, which takes into account changes in consumer prices, increased 0.7 percent in 2021.

In the manufacturing sector, productivity increased 3.2 percent in 2021, reflecting an increase in output of 6.5 percent and an increase in hours worked of 3.1 percent. The increase in output was the largest annual increase since an increase of 6.5 percent in 2010, and the increase in hours worked was the largest in the series, which goes back to 1987.

Manufacturing unit labor costs increased 0.7 percent in 2021, with hourly compensation increasing 4.0 percent. Manufacturing real hourly compensation decreased 0.6 percent.

Quarterly and annual data for all sectors from 2019 to 2021 appear in tables 1-6. Full historical measures can be found on the Productivity and Costs home page: www.bls.gov/lpc/#data.

Nondurable Previous quarter -4.0 4.5 8.8 5.1 -2.6 9.4 manufacturing A year ago 0.3 4.0 3.7 5.9 -0.7 5.6