2022 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 2022, Revised

Nonfarm business sector labor productivity decreased 4.1 percent in the second quarter of 2022, the U.S. Bureau of Labor Statistics reported today, as output decreased 1.4 percent and hours worked increased 2.7 percent. (All quarterly percent changes in this release are seasonally adjusted annual rates.) The 4.1-percent decrease in labor productivity reported today for the second quarter of 2022 is a 0.5- percentage point upward revision from the preliminary estimate of a 4.6-percent decrease, primarily driven by a 0.7-percentage point upward revision to output. From the same quarter a year ago, nonfarm business sector labor productivity decreased 2.4 percent. This is the largest decline in the series, which begins in the first quarter of 1948. (See table A1.)

Unit labor costs in the nonfarm business sector increased 10.2 percent in the second quarter of 2022, reflecting a 5.7-percent increase in hourly compensation and a 4.1-percent decrease in productivity. Unit labor costs increased 9.3 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 per hour worked declined; labor productivity fell 7.4 percent in the first quarter of 2022. The 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 3.1 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 4.7 percent in the second quarter of 2022, as output increased 4.0 percent and hours worked decreased 0.7 percent. In the durable manufacturing sector, productivity increased 4.9 percent, with a 5.3-percent increase in output and a 0.4-percent increase in hours worked. Nondurable manufacturing sector productivity increased 5.2 percent, as output increased 2.7 percent and hours worked decreased 2.4 percent. Total manufacturing sector productivity increased 0.2 percent from the same quarter a year ago. (See tables A1, 3, 4, and 5.)

The manufacturing labor productivity index is 4.7 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. Manufacturing sector output is now 3.5 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 1.2 percent below the fourth-quarter 2019 level.

Unit labor costs in the total manufacturing sector decreased 0.2 percent in the second quarter of 2022, reflecting a 4.5-percent increase in hourly compensation and a 4.7-percent increase in productivity. Manufacturing unit labor costs increased 4.5 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.

Preliminary measures for the second quarter of 2022 were announced today for the nonfinancial corporate sector. Productivity decreased 0.7 percent in the second quarter of 2022 as output increased 1.6 percent and hours worked increased 2.4 percent. Productivity decreased 0.6 percent over the last four quarters. Unit profits of nonfinancial corporations increased at a 40.9-percent annual rate in the second quarter of 2022 and increased 7.5 percent over the last four quarters. (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 2022.

In the second quarter of 2022, nonfarm business sector productivity decreased 4.1 percent--a 0.5- percentage point upward revision from the preliminary estimate of a 4.6-percent decrease--reflecting a 0.7-percentage point upward revision to output and a 0.1-percentage point upward revision to hours worked. Unit labor costs increased 10.2 percent rather than increasing 10.8 percent as previously reported, reflecting a 0.5-percentage point upward revision to productivity; there was no revision to hourly compensation for the second quarter of 2022.

Manufacturing sector productivity for the second quarter of 2022 was revised down to an increase of 4.7 percent from a previously reported increase of 5.5 percent. This revision stems mainly from durable manufacturing sector productivity, which was revised down 1.2 percentage points to an increase of 4.9 percent; nondurable manufacturing sector productivity had a smaller downward revision of 0.2 percentage point to an increase of 5.2 percent. Total manufacturing unit labor costs decreased 0.2 percent in the second quarter of 2022 rather than decreasing 0.5 percent as previously reported.

In the first quarter of 2022, nonfarm business sector productivity and unit labor costs were not revised; productivity fell 7.4 percent and unit labor costs increased 12.7 percent. Manufacturing sector productivity was revised down 0.2 percentage point to a decrease of 1.2 percent. As a result, unit labor costs were revised up 0.2 percentage point to an increase of 7.1 percent. In the nonfinancial corporate sector, first-quarter 2022 productivity, unit labor costs, and unit profits were not revised. (See table 6.)

Complete quarterly and annual data series can be found on the Productivity and Costs home: 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.

Durable Previous quarter 4.9 5.3 0.4 4.9 -5.1 0.0 manufacturing A year ago 1.3 6.0 4.7 3.0 -5.2 1.7

Nonfinancial Previous quarter -0.7 1.6 2.4 5.8 -4.2 6.6 corporate A year ago -0.6 3.6 4.2 7.3 -1.2 8.0