2022 Second 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.

Second Quarter 2022, Preliminary

Nonfarm business sector labor productivity decreased 4.6 percent in the second quarter of 2022, the U.S. Bureau of Labor Statistics reported today, as output decreased 2.1 percent and hours worked increased 2.6 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 2.5 percent, reflecting a 1.5-percent increase in output and a 4.1-percent increase in hours worked. The 2.5-percent decline in labor productivity from the same quarter a year ago is the largest decline in this series, which begins in the first quarter of 1948. (See table A1.)

Unit labor costs in the nonfarm business sector increased 10.8 percent in the second quarter of 2022, reflecting a 5.7-percent increase in hourly compensation and a 4.6-percent decrease in productivity. Unit labor costs increased 9.5 percent over the last four quarters. (See tables A1 and 2.) This is the largest four-quarter increase in this measure since a 10.6-percent increase in the first 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. The second quarter of 2022 is the second consecutive quarter in which output decreased while hours increased. The resulting productivity declines over these two quarters reduced the average annual productivity growth rate since the fourth quarter of 2019–the last quarter not affected by the COVID-19 pandemic–to 0.6 percent in the nonfarm business sector. Output and hours worked in the nonfarm business sector are now 2.9 percent and 1.5 percent above their fourth-quarter 2019 levels, respectively.

Hourly compensation increased 5.7 percent in the nonfarm business sector in the second quarter of 2022. Real hourly compensation, which takes into account changes in consumer prices, decreased 4.4 percent in the second quarter of 2022, which followed a 4.4-percent decline in the first quarter of 2022. The consumer price series which is used to estimate real hourly compensation grew 10.5 percent in the second quarter of 2022, the largest increase since an 11.6-percent increase in the first quarter of 1981 (seasonally adjusted annual rates). See Footnote 2 for more information.

Manufacturing sector labor productivity increased 5.5 percent in the second quarter of 2022, as output increased 4.3 percent and hours worked decreased 1.1 percent. In the durable manufacturing sector, productivity increased 6.1 percent, with a 6.0-percent increase in output and a 0.1-percent decrease in hours worked. Nondurable manufacturing sector productivity increased 5.4 percent, as output increased 2.6 percent and hours decreased 2.6 percent. Total manufacturing sector productivity increased 0.4 percent from the same quarter a year ago. (See tables A1, 3, 4, and 5.)

Manufacturing sector output is now 3.6 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 1.3 percent below the fourth-quarter 2019 level. The manufacturing labor productivity index is 4.9 percent higher in second-quarter 2022 than in fourth-quarter 2019, corresponding to an annual labor productivity growth rate of 1.9 percent during that period.

Unit labor costs in the total manufacturing sector decreased 0.5 percent in the second quarter of 2022, reflecting a 4.9-percent increase in hourly compensation and a 5.5-percent increase in productivity. Manufacturing unit labor costs increased 4.4 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

Regular updates of source data published in June and July by the BLS and the Bureau of Economic Analysis (BEA) are reflected in data for the first quarter of 2022; data published by BLS August 5, 2022 have not been incorporated. Quarterly measures of manufacturing output and all related measures-- including labor productivity--were revised historically to incorporate revised monthly Indexes of Industrial Production (IIP) published by the Board of Governors of the Federal Reserve System on June 28, 2022. Annual manufacturing output measures for 1987 to 2020 were not revised; the annual average percent change for 2021 reflects changes in IIP.

Nonfarm business sector productivity was revised down slightly to a decrease of 7.4 percent in the first quarter of 2022; output was revised down to a decrease of 2.5 percent and hours worked were revised down to an increase of 5.3 percent. (See table B1.) A slight upward revision to first-quarter unit labor costs, to a rate of 12.7 percent, reflected a slight downward revision to productivity; hourly compensation was not revised.

Manufacturing sector productivity was revised down 1.2 percentage points to a decline of 1.0 percent in the first quarter of 2022, primarily reflecting a downward revision to output; hours were revised up slightly. Productivity was revised down in the durable manufacturing subsector and the nondurable manufacturing subsector. In the first quarter of 2022, total manufacturing unit labor costs increased 6.9 percent rather than increasing 5.7 percent as reported June 2, reflecting a 1.2-percent downward revision to productivity; hourly compensation was revised down 0.1 percentage point. Annual average manufacturing productivity growth in 2021 was revised down to an increase of 2.6 percent from the 3.2- percent reported previously due to a downward revision in output. (See tables B1 and 3.)

Nonfinancial corporate sector productivity decreased 4.6 percent in the first quarter of 2022, a smaller decline than the previously published estimate of 5.0 percent, reflecting an upward revision to output and a downward revision to hours. Productivity in nonfinancial corporations decreased 0.1 percent from the first quarter of 2021 to the first quarter of 2022. Unit labor costs in the nonfinancial corporate sector were revised down to an increase of 9.3 percent in the first quarter of 2022, as an upward revision to productivity was larger than an upward revision to hourly compensation. (See table A2.) Unit labor costs increased 8.2 percent from the same quarter a year ago. Unit profits were revised up in the first quarter to a smaller decline than previously reported, decreasing 2.1-percent in first- quarter 2022. (See table 6.)

Complete quarterly and annual data series can be found on the Productivity and Costs home page: www.bls.gov/productivity/data-overview.htm.

Upcoming Revisions

Data in this release do not reflect the 2022 Annual Update of the National Income and Product Accounts (NIPA) to be released by the Bureau of Economic Analysis of the U.S. Department of Commerce on September 29, 2022. This annual update will be incorporated in our release on November 3, 2022.

Upcoming methodology change

The BLS productivity program will introduce a new methodology for estimating hours worked for its major sector Productivity and Costs news release on November 3, 2022. This new methodology uses all- employee hours data from the BLS Current Employment Statistics (CES) survey as the main source of data. The new methodology for estimating hours worked improves on the current methodology, which uses the CES production and nonsupervisory employee hours data. For more information see www.bls.gov/productivity/technical-notes/labor-productivity-hours-worked-method-using-ces-all- employee-hours-nov-2022.htm.