2023 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 2023, Preliminary

Nonfarm business sector labor productivity decreased 2.7 percent in the first quarter of 2023, the U.S. Bureau of Labor Statistics reported today, as output increased 0.2 percent and hours worked increased 3.0 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 0.9 percent, reflecting a 1.3-percent increase in output and a 2.3-percent increase in hours worked. (See table A1.) The 0.9- percent productivity decline is the first time the four-quarter change series has remained negative for five consecutive quarters; this series begins in the first quarter of 1948.

Unit labor costs in the nonfarm business sector increased 6.3 percent in the first quarter of 2023, reflecting a 3.4-percent increase in hourly compensation and a 2.7-percent decrease in productivity. Unit labor costs increased 5.8 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, decreased 0.3 percent in the first quarter of 2023, and declined 1.0 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. During the current business cycle, starting in the fourth quarter of 2019, labor productivity has grown at an annual rate of 1.1 percent, reflecting a 1.9-percent rate of growth in output and a 0.8-percent rate of growth in hours worked during the business cycle. The 1.1-percent rate of productivity growth in the current business cycle thus far is a historically low productivity growth rate; no other previous business cycle had lower productivity growth, except for the brief six-quarter cycle from 1980 Q1 to 1981 Q3, which exhibited 1.0 percent growth.

Manufacturing sector labor productivity decreased 1.3 percent in the first quarter of 2023, as output increased 0.5 percent and hours worked increased 1.8 percent. In the durable manufacturing sector, productivity decreased 4.4 percent, with a 1.8-percent decrease in output and a 2.7-percent increase in hours worked. Nondurable manufacturing sector productivity increased 2.7 percent, as output increased 2.8 percent and hours worked increased 0.1 percent. Total manufacturing sector productivity decreased 1.2 percent from the same quarter a year ago. (See tables A1, 3, 4, and 5.)

Unit labor costs in the total manufacturing sector increased 3.4 percent in the first quarter of 2023, reflecting a 2.1-percent increase in hourly compensation and a 1.3-percent decrease in productivity. Manufacturing unit labor costs increased 5.8 percent from the same quarter a year ago. (See tables A1 and 3.)

Manufacturing sector output and hours worked both grew at an annual rate of 0.3 percent since the fourth quarter of 2019, and labor productivity has had no growth since the start of the business cycle. This is a historically low productivity growth rate and matches the 0.0-percent annual rate of the last business cycle from fourth-quarter 2007 through fourth-quarter 2019.

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 2022 measures were announced today for the nonfinancial corporate sector. Productivity increased 0.7 percent in the fourth quarter of 2022, as output increased 1.9 percent and hours worked increased 1.2 percent. From the fourth quarter of 2021 to the fourth quarter of 2022, nonfinancial corporate sector productivity decreased 1.6 percent.

Revised measures

Hours and related measures--including labor productivity and hourly compensation--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 2006. Measures of real hourly compensation for all sectors were subject to revision from 1984 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 2021 released March 23 by BLS, as well as annual revisions from the Federal Reserve Board released March 28.

In the fourth quarter of 2022, nonfarm business sector productivity was revised down 0.1 percentage point to an increase of 1.6 percent, reflecting a 0.2-percentage point downward revision to output and a 0.1-percentage point downward revision to hours worked. Nonfarm business unit labor costs were revised up 0.1 percentage point to an increase of 3.3 percent. Total manufacturing sector productivity was revised down 0.3 percentage point to a decrease of 3.0 percent in the fourth quarter of 2022, reflecting a 0.4-percentage point downward revision to output and a 0.1-percentage point downward revision to hours worked. Unit labor costs in the manufacturing sector were revised up 0.3 percentage point to an increase of 8.0 percent during the fourth quarter of 2022. Labor productivity was revised up 1.0 percentage point in the durable manufacturing sector to a decrease of 2.1 percent. In the nondurable manufacturing sector, labor productivity was revised down 1.7 percentage points to a decrease of 3.9 percent. (See table B1.)

The annual average rate of productivity growth in the nonfarm business sector in 2022 was revised up 0.1-percentage point to a decrease of 1.6 percent. For the manufacturing sector, annual average productivity growth in 2022 was revised down 0.3-percentage point to a decrease of 1.3 percent, reflecting a 0.2-percentage point downward revision to output. (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.

Nonfinancial Previous quarter 0.7 1.9 1.2 5.8 1.6 5.1 corporate A year ago -1.6 1.1 2.8 5.3 -1.7 7.1