2023 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 2023, Revised

(NOTE: This release was reissued on September 18, 2023, due to errors in the first and second quarter 2023 estimates of hours worked for the business, nonfarm business, and nonfinancial corporate sectors. Results for the manufacturing sectors were correct as originally published. The errors in hours worked resulted in errors in related measures, including labor productivity. Affected estimates in this release have been corrected. Corrections to percent changes from the previous quarter and from the same quarter a year ago did not exceed 0.1 percentage point. Additional information is available at www.bls.gov/errata/.)

Nonfarm business sector labor productivity increased 3.5 percent in the second quarter of 2023, the U.S. Bureau of Labor Statistics reported today, reflecting a 0.2-percentage point downward revision from the preliminary estimate. Output increased 1.9 percent and hours worked decreased 1.5 percent in the second quarter of 2023. The decline in hours worked is the first decline since the second quarter of 2020 and was the result of a 1.5-percent decline in average weekly hours; employment was unchanged. (All quarterly percent changes in this release are seasonally adjusted annual rates.) From the same quarter a year ago, nonfarm business sector labor productivity was revised down 0.1-percentage point to an increase of 1.2 percent. 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 2.2 percent in the second quarter of 2023, reflecting a 5.7-percent increase in hourly compensation and a 3.5-percent increase in productivity. Unit labor costs increased 2.5 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 2.9 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 annual rate of 1.3 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 1.3-percent annual rate of productivity growth in the current business cycle thus far is just below the 1.4-percent rate of the previous business cycle from the fourth quarter of 2007 through fourth-quarter 2019.

Manufacturing sector labor productivity increased 2.9 percent in the second quarter of 2023, as output increased 0.8 percent and hours worked decreased 2.1 percent. In the durable manufacturing sector, productivity increased 4.5 percent, reflecting a 3.2-percent increase in output and a 1.3-percent decrease in hours worked. Nondurable manufacturing sector productivity increased 2.0 percent, as output decreased 1.5 percent and hours worked decreased 3.5 percent. Total manufacturing sector productivity decreased 1.3 percent from the same quarter a year ago. (See tables A1, 3, 4, and 5.)

Unit labor costs in the total manufacturing sector increased 4.9 percent in the second quarter of 2023, reflecting an 8.0-percent increase in hourly compensation and a 2.9-percent increase in productivity. Manufacturing unit labor costs increased 5.3 percent from the same quarter a year ago. (See tables A1 and 3.)

Manufacturing sector labor productivity has increased at an annual rate of 0.2 percent during the current business cycle, which began in the fourth quarter of 2019. This rate reflects output and hours worked growing at annual rates of 0.3 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.

Preliminary measures for the second quarter of 2023 were announced today for the nonfinancial corporate sector. Productivity increased 3.7 percent in the second quarter of 2023 as output increased 2.8 percent and hours worked decreased 0.8 percent. Productivity decreased 0.6 percent over the last four quarters; this is the first time the four-quarter measure has remained negative for six consecutive quarters. Unit profits of nonfinancial corporations increased at a 0.7-percent annual rate in the second quarter of 2023 and decreased 5.5 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 2023.

In the second quarter of 2023, nonfarm business sector productivity increased 3.5 percent--a 0.2- percentage point downward revision from the preliminary estimate of a 3.7-percent increase--reflecting a 0.5-percentage point downward revision to output and a 0.2-percentage point downward revision to hours worked. From the same quarter a year ago, nonfarm business sector labor productivity was revised down 0.1 percentage point to an increase of 1.2 percent; output was revised down from an increase of 2.6 percent to an increase of 2.5 percent and hours worked increased 1.2 percent as previously reported. Unit labor costs increased 2.2 percent in the second quarter of 2023 rather than increasing 1.6 percent as previously reported, reflecting a 0.2-percentage point upward revision to hourly compensation and a 0.2-percentage point downward revision to productivity.

Manufacturing sector productivity for the second quarter of 2023 was revised down to an increase of 2.9 percent from a previously reported increase of 4.0 percent. This revision stems from a 0.7-percentage point downward revision to durable manufacturing sector productivity to an increase of 4.5 percent as well as a larger 1.4-percentage point downward revision to nondurable manufacturing sector productivity to an increase of 2.0 percent. The downward revisions to productivity in the manufacturing sectors were due to downward revisions to output that were only partially offset by small downward revisions to hours worked. Total manufacturing unit labor costs increased 4.9 percent in the second quarter of 2023 rather than increasing 3.6 percent as previously reported.

In the first quarter of 2023, nonfarm business sector productivity and unit labor costs were not revised. Manufacturing sector productivity was revised down 0.2 percentage point to a decrease of 2.0 percent. As a result, unit labor costs were revised up 0.2 percentage point to an increase of 2.6 percent. In the nonfinancial corporate sector, first-quarter 2023 productivity was revised down 0.1 percentage point to a decrease of 4.3 percent, reflecting a 0.1-percentage point upward revision to hours worked. Unit labor costs and unit profits in the nonfinancial corporate sector were not revised. (See table 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/.

Upcoming Revisions The 2023 Comprehensive Update of the National Income and Product Accounts (NIPA) will be released by the Bureau of Economic Analysis of the U.S. Department of Commerce on September 28, 2023. This update will be incorporated in our release on November 2, 2023.

Durable Previous quarter 4.5 3.2 -1.3 7.5 4.6 2.9 manufacturing A year ago -1.5 0.1 1.6 3.1 -1.0 4.6

Nonfinancial Previous quarter 3.7 2.8 -0.8 5.8 3.0 2.1 corporate A year ago -0.6 1.1 1.6 4.1 0.1 4.7