2023 Fourth 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.

Fourth Quarter and Annual Averages 2023, Revised

(NOTE: This release was reissued on April 26, 2024, to provide notice of errors that affect quarterly and annual hours worked data and all labor-related measures, including labor productivity, from first quarter 2019 through fourth quarter 2023 in all sectors. Estimates in this news release will not be corrected. The corrected data will be published in the database and reflected in the upcoming Productivity and Costs (P) First Quarter 2024 release on May 2, 2024. See this table for more information on the corrections: www.bls.gov/productivity/notices/2024/corrected-hours-worked-and-labor-productivity-for-labor- productivity-and-costs-fourth-quarter-2023.htm.)

Nonfarm business sector labor productivity increased 3.2 percent in the fourth quarter of 2023, the U.S. Bureau of Labor Statistics reported today, as output increased 3.5 percent and hours worked increased 0.3 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 increased 2.6 percent. (See table A1.) Annual average productivity increased 1.3 percent from 2022 to 2023. (See table C1.)

Unit labor costs in the nonfarm business sector increased 0.4 percent in the fourth quarter of 2023, reflecting a 3.6-percent increase in hourly compensation and a 3.2-percent increase in productivity. Unit labor costs increased 2.5 percent over the last four quarters. (See tables A1 and 2.)

Historical Revisions to Productivity and Costs Data and Method Change

Data in this release incorporate the annual benchmark revision of BLS Current Employment Statistics program data on employment and hours of employees on nonfarm payrolls. Data also include revisions to employment and hours of all other business sector workers that reflect updated seasonal adjustment of those data by the BLS Major Sector Productivity program. Additionally, data reflect an improved estimation method for hours worked by self-employed and unpaid family workers. 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 0.8 percent in the fourth quarter of 2023, and increased 1.8 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 workers, including employees, proprietors, and unpaid family workers.

Manufacturing sector labor productivity increased 1.3 percent in the fourth quarter of 2023, as output decreased 2.0 percent and hours worked decreased 3.3 percent. The 3.3-percent decrease in hours worked is the largest decline since the historic decline in the second quarter of 2020. In the durable manufacturing sector, productivity decreased 1.0 percent, reflecting a 4.0-percent decrease in output and a 3.0-percent decrease in hours worked. Nondurable manufacturing sector productivity increased 3.8 percent as hours worked decreased 3.6 percent; output was unchanged from the previous quarter. Total manufacturing sector productivity increased 0.5 percent from the same quarter a year ago. (See tables A1, 3, 4, and 5.)

Unit labor costs in the total manufacturing sector increased 5.3 percent in the fourth quarter of 2023, reflecting a 6.7-percent increase in hourly compensation and a 1.3-percent increase in productivity. Manufacturing unit labor costs increased 6.1 percent from the same quarter a year ago, reflecting an increase of 0.5 percent in labor productivity and an increase of 6.6 percent in hourly compensation. Real hourly compensation increased 3.3 percent from the same quarter a year ago. The four-quarter increases to hourly compensation and real hourly compensation are the largest since the third and fourth quarters of 2020, respectively. (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

Beginning with this news release, estimates of hours worked by self-employed workers and unpaid family workers reflect a method change to reduce volatility of the estimates. This method change removes statistically insignificant variability during seasonal adjustment of the Current Population Survey (CPS) source data. In addition, volatility associated with respondent turnover is reduced by adjusting respondent weights. These two adjustments by the BLS productivity program will dampen noise in the series without losing important information about cyclical changes in hours worked by self- employed and unpaid family workers. A more detailed discussion of the changes is available in the Monthly Labor Review at www.bls.gov/opub/mlr/2023/article/an-improved-estimate-of-self- employment-hours.htm.

Third quarter, fourth quarter, and annual average data for 2023 were revised to incorporate regular updates of source data on output and compensation published by the Department of Commerce on February 28, 2024. Quarterly measures of real hourly compensation in 2023 were revised to reflect updates to seasonally adjusted data from the BLS Consumer Price Index program released on February 13, 2024.

Quarterly and annual measures of hours worked, productivity, and related series were revised historically for all major sectors. From 2018 to 2023, the revisions reflect incorporation of revised BLS Current Employment Statistics (CES) program data for employment and hours of employees on nonfarm payrolls. Revisions to employment and hours worked from 2000 to 2023 reflect the productivity program method improvement to hours worked by self-employed and unpaid family workers as well as revised seasonal adjustment of hours worked by nonfarm self-employed and unpaid family workers, all farm workers, and employees of government enterprises. These measures, based on source data from the BLS Current Population Survey (CPS), are seasonally adjusted by the BLS Major Sector Productivity program. Because hours worked were revised for the index base year of 2017, all measures incorporating hours worked--including productivity--were subject to revision back to 1947.

Revised and previous measures for the fourth quarter of 2023 are shown in table B1 for the business, nonfarm business, and manufacturing sectors. In the fourth quarter of 2023, nonfarm business productivity was not revised and increased 3.2 percent as reported last release. Output was revised down 0.2 percentage point to an increase of 3.5 percent, and hours worked were revised down 0.1 percentage point to an increase of 0.3 percent. Unit labor costs increased 0.4 percent rather than increasing 0.5 percent as previously reported, reflecting a 0.1-percentage point downward revision to hourly compensation.

Manufacturing productivity increased 1.3 percent in the fourth quarter of 2023 rather than increasing 2.3 percent as reported last release. This reflects a 0.4-percentage point upward revision to output and a 1.3- percentage point upward revision to hours worked. A 0.1-percentage point upward revision to hourly compensation and the 1.0-percentage point downward revision to productivity produced a 1.1- percentage point upward revision to unit labor costs, which increased 5.3 percent rather than 4.2 percent as previously reported. Productivity was revised down by 2.4 percentage points in the durable manufacturing sector and up by 1.3 percentage points in the nondurable manufacturing sector. (See table B1.)

In the third quarter of 2023, nonfarm business productivity was revised down to an increase of 4.7 percent due to a 0.1-percentage point upward revision to hours worked; output was not revised. Unit labor costs increased 0.1 percent rather than decreasing 1.1 percent as previously reported, reflecting a 1.0-percentage point upward revision to hourly compensation and the 0.2-percentage point downward revision to productivity. Total manufacturing sector productivity was revised down by 0.4 percentage point as durable manufacturing productivity was revised down by 0.9 percentage point and nondurable manufacturing productivity was revised up by 0.1 percentage point. In the total manufacturing sector, unit labor costs were revised up by 2.7 percentage points to an increase of 9.0 percent, reflecting a 5.3- percentage point upward revision to durable manufacturing unit labor costs and a 2.0-percentage point downward revision to nondurable manufacturing unit labor costs. (See table B2.)

Nonfinancial corporate sector productivity increased 3.2 percent in the third quarter of 2023 rather than increasing 2.5 percent as previously reported, primarily reflecting a 0.6-percentage point upward revision to output. Unit labor costs were revised up by 0.4 percentage point to an increase of 1.6 percent. (See table A2.)

Annual averages

Unit labor costs in the nonfarm business sector were revised up 0.1 percentage point to an increase of 3.0 percent in 2023, reflecting an increase of 4.3 percent in hourly compensation and an increase of 1.3 percent in productivity. Real hourly compensation, which takes into account changes in consumer prices, increased 0.1 percent in 2023. This is the first time since 2020 that annual real hourly compensation in the nonfarm business sector has increased.

In the manufacturing sector, productivity decreased 0.8 percent in 2023, reflecting a decrease in output of 0.6 percent and an increase in hours worked of 0.2 percent.

Manufacturing unit labor costs increased 5.9 percent in 2023, as hourly compensation increased 5.1 percent while productivity decreased 0.8 percent. This is a 0.4-percentage point upward revision to manufacturing unit labor costs. Manufacturing real hourly compensation increased 0.9 percent.

Quarterly and annual data for all sectors from 2021 forward appear in tables 1-6. Full historical measures can be found on the Productivity and Costs home page: www.bls.gov/productivity/tables/.