2023 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 2023, Preliminary

Nonfarm business sector labor productivity increased 3.7 percent in the second quarter of 2023, the U.S. Bureau of Labor Statistics reported today, as output increased 2.4 percent and hours worked decreased 1.3 percent. (All quarterly percent changes in this release are seasonally adjusted annual rates.) The decline in hours worked is the first decline since the second quarter of 2020 and was the result of a 1.3-percent decline in average weekly hours; employment was unchanged. From the same quarter a year ago, nonfarm business sector labor productivity increased 1.3 percent, reflecting a 2.6- percent increase in output and a 1.2-percent increase in hours worked; this is the first increase in the four-quarter productivity measure since the fourth quarter of 2021. (See table A1.)

Unit labor costs in the nonfarm business sector increased 1.6 percent in the second quarter of 2023, reflecting a 5.5-percent increase in hourly compensation and a 3.7-percent increase in productivity. Unit labor costs increased 2.4 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 2.7 percent in the second quarter of 2023, and declined 0.3 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 workers, 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 annualized rate of 1.4 percent, as output grew at a 2.0-percent per year rate, outpacing hours worked, which grew at a 0.7-percent annual rate. The 1.4-percent annual rate of productivity growth in the current business cycle thus far is below the long-term historical average rate since 1947 of 2.1 percent.

Manufacturing sector labor productivity increased 4.0 percent in the second quarter of 2023, as output increased 1.9 percent and hours worked decreased 2.0 percent. In the durable manufacturing sector, productivity increased 5.2 percent, with a 4.1-percent increase in output and a 1.1-percent decrease in hours worked. Nondurable manufacturing sector productivity increased 3.4 percent, as output decreased 0.1 percent and hours worked decreased 3.4 percent. Total manufacturing sector productivity decreased 1.0 percent from the same quarter a year ago. (See tables A1, 3, 4, and 5.)

Unit labor costs in the total manufacturing sector increased 3.6 percent in the second quarter of 2023, reflecting a 7.8-percent increase in hourly compensation and a 4.0-percent increase in productivity. Manufacturing unit labor costs increased 4.9 percent from the same quarter a year ago. (See tables A1 and 3.)

Manufacturing sector labor productivity has increased at an annualized rate of 0.3 percent during the current business cycle, which began in the fourth quarter of 2019. This rate reflects output and hours worked growing at annualized rates of 0.4 percent and 0.1 percent, respectively. This slow productivity growth rate follows the 0.0-percent annual rate of growth during the last business cycle that spanned the fourth quarter of 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.

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 revised data for the first quarter of 2023; labor data scheduled to be published by BLS August 4, 2023 have not yet been incorporated. Regular updates of source data published in June and July by the Board of Governors of the Federal Reserve System are incorporated in revised data for the first quarter of 2023 and the fourth quarter of 2022.

Nonfarm business sector productivity was revised up to a decrease of 1.2 percent in the first quarter of 2023; output was revised up to an increase of 1.4 percent and hours worked were not revised. (See table B1.) A downward revision to first-quarter unit labor costs, to a rate of 3.3 percent, resulted from an upward revision to productivity; hourly compensation was not revised.

Manufacturing sector productivity was revised up to a decline of 1.8 percent in the first quarter of 2023, primarily reflecting an upward revision to output; hours were revised down slightly. Productivity was revised up in the durable manufacturing subsector and was not revised in the nondurable manufacturing subsector. In the first quarter of 2023, total manufacturing unit labor costs increased 2.4 percent rather than increasing 3.1 percent as reported June 1; productivity was revised up 0.7 percentage point and hourly compensation was revised up 0.1 percentage point. (See tables B1 and 3.)

Nonfinancial corporate sector productivity was revised up slightly, to a decline of 4.2 percent in the first quarter of 2023. Unit labor costs in the nonfinancial corporate sector were revised down slightly, to an increase of 6.7 percent. (See table A2 and 6.)

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/tables/.

Durable Previous quarter 5.2 4.1 -1.1 7.4 4.5 2.0 manufacturing A year ago -1.3 0.4 1.7 3.0 -1.0 4.4

Nondurable Previous quarter 3.4 -0.1 -3.4 8.3 5.4 4.7 manufacturing A year ago 0.0 -1.2 -1.3 5.3 1.2 5.3