2022 Fourth 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.

Fourth Quarter and Annual Averages 2022, Preliminary

Nonfarm business sector labor productivity increased 3.0 percent in the fourth quarter of 2022, the U.S. Bureau of Labor Statistics reported today, as output increased 3.5 percent and hours worked increased 0.5 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 1.5 percent, reflecting a 0.8-percent increase in output and a 2.3-percent increase in hours worked. (See table A1.) Annual average productivity decreased 1.3 percent from 2021 to 2022. This is the largest annual decline in the measure since 1974, when productivity decreased 1.7 percent. (See table C1.)

Unit labor costs in the nonfarm business sector increased 1.1 percent in the fourth quarter of 2022, reflecting a 4.1-percent increase in hourly compensation and a 3.0-percent increase in productivity. Unit labor costs increased 4.5 percent over the last four quarters. (See tables A1 and 2.)

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. Real hourly compensation, which takes into account consumer prices, increased 1.0 percent in the fourth quarter, and declined 3.8 percent over the last four quarters.

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 fourth quarter of 2022 is the second consecutive quarter in which both output and labor productivity increased, following decreases in the first two quarters of the year. Hours worked grew in all four quarters of 2022, but slower growth in the fourth quarter contributed to the acceleration in productivity growth in that quarter. The labor productivity index has grown at an annualized rate of 1.7 percent since the last business cycle peak in the fourth quarter of 2019--the last quarter before the COVID-19 pandemic and ensuing recession--reflecting a 2.1-percent rate of growth in output and a 0.4-percent rate of growth in hours worked over that three-year period.

Manufacturing sector labor productivity decreased 1.5 percent in the fourth quarter of 2022, as output decreased 2.6 percent and hours worked decreased 1.1 percent. In the durable manufacturing sector, productivity decreased 1.7 percent, with a 2.9-percent decrease in output and a 1.2-percent decrease in hours worked. Nondurable manufacturing sector productivity decreased 1.4 percent, as output decreased 2.3 percent and hours worked decreased 0.9 percent. Total manufacturing sector productivity decreased 1.5 percent from the same quarter a year ago. (See tables A1, 3, 4, and 5.)

Unit labor costs in the total manufacturing sector increased 4.8 percent in the fourth quarter of 2022, reflecting a 3.2-percent increase in hourly compensation and a 1.5-percent decrease in productivity. Manufacturing unit labor costs increased 4.3 percent from the same quarter a year ago. (See tables A1 and 3.)

Manufacturing sector labor productivity declined in 5 of the last 6 quarters. In the third and fourth quarters of 2022, output also declined; productivity decreased in the other three quarters because hours worked increased faster than output. The total manufacturing labor productivity index has grown at an annualized rate of 0.8 percent in the current business cycle since the fourth quarter of 2019, reflecting a 0.9-percent rate of growth in output and a 0.1-percent rate of growth in hours worked.

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

Revised and previously published measures for the third quarter of 2022 are shown in tables A2 and B1 and cover the following major sectors: nonfarm business, business, manufacturing, and nonfinancial corporations.

In the third quarter of 2022, nonfarm business productivity was revised up 0.6 percentage point, to an increase of 1.4 percent. (See table B1.) Unit labor costs increased 2.0 percent in the third quarter, rather than increasing 2.4 percent as previously reported.

In the manufacturing sector, productivity in the third quarter of 2022 was revised down 0.6 percentage point, to a decrease of 3.5 percent. Manufacturing unit labor costs increased 6.5 percent, a 0.7- percentage point upward revision from the previous estimate.

In the nonfinancial corporate sector, productivity was revised up 0.2 percentage point in the third quarter of 2022 to a decrease of 1.6 percent. This revision reflects a 0.1-percentage point upward revision to output to an increase of 1.9 percent. Hours worked were revised down 0.2 percentage point to an increase of 3.5 percent. (See table A2.)

Annual averages

Unit labor costs in the nonfarm business sector increased 5.7 percent in 2022, reflecting an increase of 4.4 percent in hourly compensation and a decline of 1.3 percent in productivity. This is the largest annual increase in unit labor costs since an 8.2-percent increase in 1982. Real hourly compensation, which takes into account changes in consumer prices, decreased 3.4 percent in 2022. This is the largest decline in the series, which begins in 1948. Consumer prices grew 8.0 percent in 2022, which was the highest annual growth rate since a 9.4-percent increase in 1981.

In the manufacturing sector, productivity decreased 0.9 percent in 2022, reflecting an increase in output of 3.2 percent and an increase in hours of 4.2 percent. The increase in hours was the largest in the series, which begins in 1988.

Manufacturing unit labor costs increased 4.3 percent in 2022. Manufacturing real hourly compensation decreased 4.3 percent, as hourly compensation increased 3.4 percent while consumer prices increased 8.0 percent. The decrease in real hourly compensation was the largest in the series, which begins in 1988.

Quarterly and annual data, where available, for all sectors from 2020 to 2022 appear in tables 1-6. Full historical measures can be found on the Productivity and Costs home page: www.bls.gov/productivity/tables/.

Upcoming Revisions

Data in this release do not reflect the annual benchmark revision of the BLS Current Employment Statistics program data to be released February 3, 2023. This benchmark will be incorporated in the next release on March 2, 2023.