2022 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 2022, Preliminary

Nonfarm business sector labor productivity decreased 7.5 percent in the first quarter of 2022, the U.S. Bureau of Labor Statistics reported today, as output decreased 2.4 percent and hours worked increased 5.5 percent. This is the largest decline in quarterly productivity since the third quarter of 1947, when the measure decreased 11.7 percent. (All quarterly percent changes in this release are seasonally adjusted annual rates.) From the same quarter a year ago, nonfarm business sector labor productivity decreased 0.6 percent, reflecting a 4.2-percent increase in output that was outpaced by a 4.8-percent increase in hours worked. This is the largest four-quarter decline since the fourth quarter of 1993, when the measure also declined 0.6 percent. (See table A1.)

Unit labor costs in the nonfarm business sector increased 11.6 percent in the first quarter of 2022, reflecting a 3.2-percent increase in hourly compensation and a 7.5-percent decrease in productivity. Unit labor costs increased 7.2 percent over the last four quarters. (See table A1.) This is the largest four- quarter increase in this measure since an 8.2-percent increase in the third quarter of 1982. 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. In the first quarter of 2022, while hours worked surpassed its fourth quarter 2019 level for the first time, output saw its first quarterly decrease since the historic declines in those measures in the second quarter of 2020. The hours worked index is now 0.9 percent above its fourth quarter 2019 level, the last quarter not affected by the COVID-19 pandemic. The first-quarter 2022 output index is 3.5 percent above the level seen in the fourth quarter of 2019. The labor productivity index is 2.6 percent higher in first-quarter 2022 than in fourth-quarter 2019, corresponding to an annual labor productivity growth rate of 1.1 percent during that period. (See tables A1 and 2.)

Manufacturing sector labor productivity increased 0.7 percent in the first quarter of 2022, as output increased 5.7 percent and hours worked increased 5.1 percent. In the durable manufacturing sector, productivity increased 1.4 percent, with a 7.9-percent increase in output and a 6.4-percent increase in hours worked. Nondurable manufacturing sector productivity increased 0.5 percent, with a 3.4-percent increase in output and a 2.9-percent increase in hours worked. Total manufacturing sector productivity increased 1.7 percent from the same quarter a year ago. (See tables A1, 3, 4, and 5.)

Manufacturing sector output is now 3.3 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 1.0 percent below the fourth-quarter 2019 level. The manufacturing labor productivity index is 4.3 percent higher in first-quarter 2022 than in fourth-quarter 2019, corresponding to an annual labor productivity growth rate of 1.9 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.

Unit labor costs in the total manufacturing sector increased 2.1 percent in the first quarter of 2022, reflecting a 2.8-percent increase in hourly compensation and a 0.7-percent increase in productivity. Manufacturing unit labor costs increased 1.8 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.

Preliminary fourth-quarter and annual 2021 measures were announced today for the nonfinancial corporate sector. Productivity remained unchanged in the fourth quarter of 2021 compared to the previous quarter, as both output and hours worked increased 3.9 percent. From the fourth quarter of 2020 to the fourth quarter of 2021, nonfinancial corporate sector productivity increased 1.6 percent.

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 2017; resulting revisions to percent changes were small. Measures of real hourly compensation for all sectors also were revised from 2017 forward due to the incorporation of the revised Consumer Price Index Retroactive Series. Measures of output for the manufacturing sectors incorporate revised annual benchmark data from 1987 to 2020 released March 24 by BLS.

In the fourth quarter of 2021, nonfarm business sector productivity was revised down 0.3 percentage point to an increase of 6.3 percent, reflecting a 0.1-percentage point downward revision to output and a 0.1-percentage point upward revision to hours worked. Nonfarm business unit labor costs were revised up 0.1 percentage point to an increase of 1.0 percent. Total manufacturing sector productivity was revised down 0.5 percentage point to a decrease of 0.6 percent in the fourth quarter of 2021, reflecting a 0.4-percentage point downward revision to output and a 0.3-percentage point upward revision to hours worked. Unit labor costs in the manufacturing sector were revised up 0.3 percentage point to an increase of 1.7 percent during the fourth quarter of 2021. Labor productivity was revised down 1.0 percentage point in the durable manufacturing sector to an increase of 1.8 percent, and was also revised down 0.1 percentage point in the nondurable manufacturing sector to a decrease of 4.1 percent. (See table B1.)

Annual average rates of productivity growth in the nonfarm business and manufacturing sectors were not revised for 2021, and remain at 1.9 percent and 3.2 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/productivity/data-overview.htm.

Durable Previous quarter 1.4 7.9 6.4 1.9 -6.7 0.5 manufacturing A year ago 2.1 5.2 3.0 1.4 -6.1 -0.8

Nondurable Previous quarter 0.5 3.4 2.9 4.2 -4.5 3.7 manufacturing A year ago 0.9 5.2 4.2 7.6 -0.4 6.6

Nonfinancial Previous quarter 0.0 3.9 3.9 8.0 0.1 8.0 corporate A year ago 1.6 6.3 4.6 6.1 -0.6 4.4