U.S. Third Quarter Productivity and Cost Report (Text)

The following is the text of the U.S. productivity and costs report for the third quarter released by the Labor Department.

Nonfarm business sector labor productivity increased at a 2.3 percent annual rate during the third quarter of 2010, the U.S. Bureau of Labor Statistics reported today. Labor productivity is calculated by dividing an index of real output by an index of the combined hours worked of all persons, including employees, proprietors, and unpaid family workers. Output increased 3.7 percent and hours worked increased 1.4 percent in the third quarter. (All quarterly percent changes in this release are seasonally adjusted annual rates.) Nonfarm business productivity increased 2.5 percent from the third quarter of 2009 to the third quarter of 2010, as output increased 4.3 percent and hours worked rose 1.7 percent.

The productivity measures released today are based on more recent and more complete data than were available for the preliminary report issued last month (see Revised measures).

Unit labor costs in nonfarm businesses decreased 0.1 percent in the third quarter of 2010, because productivity grew 2.3 percent while hourly compensation increased 2.2 percent. Over the last four quarters, unit labor costs declined 1.1 percent. BLS defines 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 output per hour tend to reduce them.

Business sector productivity increased 2.5 percent in the third quarter of 2010, as output increased 3.7 percent and hours increased 1.2 percent. Over the last four quarters, business sector productivity increased 2.6 percent.

Manufacturing sector productivity rose 0.6 percent in the third quarter of 2010, as output and hours grew 4.2 percent and 3.6 percent, respectively. In the durable manufacturing subsector, output per hour declined 0.5 percent as output grew 6.0 percent but hours grew faster, 6.5 percent. In nondurable goods industries productivity increased 3.2 percent, due both to an increase in output and a decline in hours. Over the last four quarters, total manufacturing productivity increased 4.0 percent as output rose 7.1 percent and hours increased 3.0 percent. Manufacturing unit labor costs increased 1.0 percent in the third quarter of 2010, but fell 2.9 percent over the last four quarters.

The data sources and methods used in the preparation of the manufacturing output series differ from those used in preparing the business and nonfarm business output series, and these measures are not directly comparable. See Technical Notes for more information on data sources.

Preliminary third-quarter 2010 data for the nonfinancial corporate sector also were released today. Output per hour fell 2.4 percent as output declined 0.2 percent and hours rose 2.3 percent.

Revised measures

Measures for the second and third quarters of 2010 for all sectors reflect normal updates of source data including output, employment, and hours. Additionally, manufacturing productivity, output, and unit labor costs series were revised back to 1987 to reflect revised output indexes constructed by BLS using data from the U.S. Department of Commerce. Table B presents previous and revised productivity and related measures for the major sectors: business, nonfarm business and manufacturing, for the third and second quarters of 2010. Revised annual indexes for the manufacturing sectors appear in appendix tables 1-3. Full historical annual and quarterly measures can be found on the labor productivity and costs home page http://www.bls.gov/lpc/#data.

In the nonfarm business sector, third quarter productivity growth was revised up to 2.3 percent from a previous estimate of 1.9 percent, because the upward revision to output was greater than the upward revision to hours. Nonfarm business productivity in the second quarter was not revised. Unit labor costs declined by the same amount in the third quarter as previously reported, 0.1 percent. However, second quarter unit labor costs were revised up substantially due to an upward revision to hourly compensation.

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