2023 Third 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.

Third Quarter 2023, Preliminary

Nonfarm business sector labor productivity increased 4.7 percent in the third quarter of 2023, the U.S. Bureau of Labor Statistics reported today, as output increased 5.9 percent and hours worked increased 1.1 percent. (All quarterly percent changes in this release are seasonally adjusted annual rates.) The increase in labor productivity is the highest rate since the third quarter of 2020, in which productivity increased 5.7 percent. From the same quarter a year ago, nonfarm business sector labor productivity increased 2.2 percent in the third quarter of 2023. (See table A1.)

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.

Unit labor costs in the nonfarm business sector decreased 0.8 percent in the third quarter of 2023, reflecting a 3.9-percent increase in hourly compensation and a 4.7-percent increase in productivity. Unit labor costs increased 1.9 percent over the last four quarters. (See tables A1 and 2.)

Historical Revisions

Data in this release reflect the 2023 Comprehensive Update of the National Income and Product Accounts (NIPA) released by the Bureau of Economic Analysis of the U.S. Department of Commerce on September 28, 2023. See “Revised measures” section.

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 0.3 percent in the third quarter of 2023, and increased 0.6 percent over the last four quarters.

Manufacturing sector labor productivity declined 0.7 percent in the third quarter of 2023, as output decreased 0.1 percent and hours worked increased 0.7 percent. In the durable manufacturing sector, productivity decreased 1.4 percent, reflecting a 2.3-percent increase in output and a 3.8-percent increase in hours worked. Nondurable manufacturing sector productivity increased 2.1 percent, as output decreased 2.4 percent and hours worked decreased 4.4 percent. Total manufacturing sector productivity decreased 0.7 percent from the same quarter a year ago. (See tables A1, 3, 4, and 5.)

Unit labor costs in the total manufacturing sector increased 7.0 percent in the third quarter of 2023, reflecting a 6.2-percent increase in hourly compensation and a 0.7-percent decrease in productivity. Manufacturing unit labor costs increased 5.8 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.

Revised measures

Measures of output for the business, nonfarm business, and nonfinancial corporate sectors, and measures of compensation for all sectors, incorporate revised National Income and Product Accounts (NIPA) data released on September 28, 2023, by the Bureau of Economic Analysis (BEA), U.S. Department of Commerce. Measures of real output provided by BEA reflect a change in base year from 2012 to 2017, and BLS has also changed the base year of indexes of labor productivity and related measures to 2017. As a result, all indexes in this release were revised historically. Revisions to percent change measures affected shorter time periods. Quarterly and annual measures incorporating compensation were subject to revision back to 2008 for the business and nonfarm business sectors, back to 2013 for the nonfinancial corporate sector, and back to 2018 for the manufacturing sector. Source data on output and compensation released by BEA on October 26, 2023, are reflected in data for the third quarter of 2023. Regular updates of source data on manufacturing output released in September and October by the Board of Governors of the Federal Reserve System are reflected in data for the first three quarters of 2023; there were no historical revisions to manufacturing output.

Hours worked and related measures for the business and nonfarm business sectors were subject to revision back to 2008 due to revised NIPA data on government enterprises employment and on the proportion of industry compensation paid to employees of nonprofit institutions. Hours worked and related measures for the nonfinancial corporate sector were subject to revision back to 2006 due to the incorporation of revised NIPA data on the proportion of industry compensation paid to employees of corporations.

In second-quarter 2020, productivity was revised up 3.4 percentage points due to a 2.2-percentage point upward revision to output and a 0.2-percentage point upward revision to hours worked. The revised figures now stand at an increase of 20.7 percent for productivity and decreases of 32.8 percent and 44.4 percent in output and hours worked, respectively. The second-quarter 2020 change is now the largest productivity increase in the series, topping the 17.9-percent increase in the fourth quarter of 1947. Other notably revised periods include the first and second quarters of 2021, which saw downward revisions to productivity of 1.8 percentage points and 1.5 percentage points, respectively. Because hours worked were not revised in these two quarters, these revisions can be attributed to downward revisions to output of 2.0 percentage points and 1.6 percentage points, respectively. Productivity in the first and second quarters of 2021 now stand at increases of 1.6 percent and 0.8 percent, respectively.

From the first quarter of 2012 to the second quarter of 2023, growth was revised upward overall, causing the revised index to outpace the previously published index. The average annual rate of nonfarm business sector productivity growth from the first quarter of 2012 to the second quarter of 2023 was revised up 0.1 percentage point to an increase of 1.3 percent.

The average annual rate of nonfarm business sector productivity growth during the portion of the current business cycle subject to revision--from the fourth quarter of 2019 to the second quarter of 2023--was revised down 0.1 percentage point to an increase of 1.2 percent. The rate of growth for this business cycle through the current quarter--the third quarter of 2023--is 1.4 percent.

Nonfarm business sector productivity in the second quarter of 2023 was revised up 0.1 percentage point to an increase of 3.6 percent. As hours worked were unrevised, this stems from a 0.1-percentage point upward revision to output. Second-quarter unit labor costs were revised up 1.0 percentage point to an increase of 3.2 percent, reflecting a 1.2-percentage point upward revision to hourly compensation and the aforementioned revision to productivity. Real hourly compensation in the second quarter of 2023 was also revised upward 1.2 percentage point, to an increase of 4.1 percent. (See table B1.)

Manufacturing sector productivity was revised up 0.2 percentage point to an increase of 3.1 percent in the second quarter of 2023, reflecting a 0.2-percentage point upward revision to output. Hours worked were unrevised. Productivity was revised up 0.9 percentage point in the durable manufacturing sector and down 0.5 percentage point in the nondurable manufacturing sector. In the second quarter of 2023, total manufacturing unit labor costs increased 6.3 percent rather than 4.9 percent as previously reported, reflecting a 1.7-percentage point upward revision to hourly compensation which was partially offset by the 0.2-percentage point upward revision to productivity. (See table B1.)

Nonfinancial corporate sector productivity increased 2.1 percent in the second quarter of 2023, rather than the previously published estimate of a 3.7-percent increase, as a result of a 1.6-percentage point downward revision to output and a 0.1-percentage point downward revision to hours worked. Unit labor costs in the nonfinancial corporate sector were revised up 2.8 percentage points to an increase of 4.9 percent in the second quarter of 2023, as hourly compensation was revised up 1.3 percentage points and productivity was revised down 1.6 percentage points. (See table A2.)

Annual averages

Annual average productivity in the nonfarm business sector was revised down to a 1.9-percent decrease in 2022, as output increased 2.1 percent and hours worked increased 4.0 percent. Annual average productivity in 2021 was revised down 0.5 percentage point to an increase of 1.7 percent, and in 2020 was revised up 0.7 percentage point to an increase of 5.2 percent. Unit labor costs were revised down 0.5 percentage point in 2022, revised up 0.7 percentage point in 2021, and revised down 0.6 percentage point in 2020. (See table C1.)

Annual average manufacturing sector productivity, output, and hours worked were not revised for 2022, 2021, or 2020. Unit labor costs were revised down in 2022, 2021, and 2020 by 0.3 percentage point, 0.4 percentage point, and 0.2 percentage point, respectively. (See table C1.)

In the nonfinancial corporate sector, productivity was revised up 1.2 percentage points to a decrease of 1.0 percent in 2022. This stemmed from a 1.1-percentage point upward revision to output, as hours worked were unrevised. Unit labor costs were revised down 2.5 percentage points to an increase of 5.2 percent, reflecting a 1.2-percentage point downward revision to hourly compensation and the aforementioned revision to productivity. (See tables C1 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 -1.4 2.3 3.8 4.2 0.6 5.7 manufacturing A year ago -0.7 0.5 1.1 4.5 0.9 5.2

Nondurable Previous quarter 2.1 -2.4 -4.4 9.4 5.6 7.1 manufacturing A year ago 0.1 -2.1 -2.2 5.7 2.1 5.6