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

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

Nonfarm business sector labor productivity decreased at a 0.3 percent annual rate during the second quarter of 2011, the U.S. Bureau of Labor Statistics reported today, with output and hours worked rising 1.8 percent and 2.0 percent, respectively. (All quarterly percent changes in this release are seasonally adjusted annual rates.) From the second quarter of 2010 to the second quarter of 2011, output increased 2.5 percent while hours rose 1.6 percent, yielding an increase in productivity of 0.8 percent.

Labor productivity, or output per hour, is calculated by dividing an index of real output by an index of hours worked of all persons, including employees, proprietors, and unpaid family workers.

Unit labor costs in nonfarm businesses rose 2.2 percent in the second quarter of 2011, because hourly compensation increased 1.9 percent while productivity decreased 0.3 percent. Over the last four quarters, hourly compensation increased more than output per hour, and unit labor costs rose 1.3 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.

Data in this release reflect the regular multi-year revision to the National Income and Product Accounts (NIPA) released by the Bureau of Economic Analysis of the U.S. Department of Commerce on July 29, 2011. See Revised Measures.

Manufacturing sector productivity fell 2.0 percent in the second quarter of 2011, as output rose 0.6 percent and hours increased 2.6 percent. Over the last four quarters, manufacturing productivity increased 2.3 percent. Unit labor costs in manufacturing increased 4.4 percent in the second quarter of 2011 and were unchanged (0.0 percent) over the last four quarters.

Productivity fell 3.5 percent in the durable goods sector in the second quarter of 2011 as a 5.1 percent increase in hours outpaced a 1.4 percent increase in output. In contrast, nondurable goods manufacturing productivity increased 1.2 percent as hours decreased faster than output.

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 further information on data sources.

Nonfinancial corporate sector productivity increased 1.4 percent in the first quarter of 2011 as output and hours rose 3.6 percent and 2.1 percent, respectively.

Revised Measures

Measures of output for the business, nonfarm business, and nonfinancial corporate (NFC) sectors, and compensation for all sectors incorporate the revised National Income and Product Accounts (NIPA) data released on July 29 by the Bureau of Economic Analysis, U.S. Department of Commerce. As a result, output and related series, including productivity and unit labor costs, were revised back to 1947 for the business and nonfarm business sectors, and back to 2000 for the NFC sector. Hours and related measures were revised back to 2002 for the business and nonfarm business sectors, and back to 1997 for nonfinancial corporations. These revisions were due to the incorporation of 2007 Economic Census final data on employment, as well as revised NIPA data on compensation of all employees and employment in government enterprises.

In the first quarter of 2011, nonfarm business productivity declined 0.6 percent, rather than increasing 1.8 percent, reflecting a downward revision of 2.3 percentage points to output. Hourly compensation increased 4.2 percent in the first quarter, a larger gain than reported June 2. Consequently, unit labor costs were revised upward to 4.8 percent. In the manufacturing sector, productivity growth in the first quarter remained at 4.2 percent, due to offsetting upward revisions to output and hours. Unit labor costs declined 1.1 percent rather than 1.4 percent as reported June 2.

For the year 2010, nonfarm business productivity growth was revised up to 4.1 percent from the 3.9 percent increase reported June 2, the result of a larger upward revision to output than hours. Unit labor costs declined 2.0 percent-- the largest decline in the annual series which begins in 1948. In manufacturing, productivity growth was unchanged at 5.9 percent. Unit labor costs fell 4.0 percent, the largest decline in the series which extends back to 1988.

For the year 2009, nonfarm business productivity growth was revised down to 2.3 percent from the previous estimate of 3.7 percent due to a downward revision in output. Unit labor costs declined 0.7 percent, a smaller decline than reported June 2. Manufacturing productivity declined 0.4 percent, as reported previously. The 4.9 percent increase in unit labor costs was less than the 6.1 percent increase published June 2, due to a downward revision to hourly compensation.

For the year 2008, nonfarm business productivity was revised down to 0.6 percent from 1.0 percent as output was revised downward. Unit labor costs were revised up to 2.8 percent. In manufacturing, productivity, hours and output changed at the same rates reported previously. Unit labor costs were revised upward to 4.7 percent.

Nonfarm business productivity increased at an average annual rate of 2.5 percent from 2000 to 2010 rather than the 2.7 percent rate reported June 2. Manufacturing productivity grew at an annual average rate of 3.2 percent from 2000 to 2010, as previously reported.

In the nonfinancial corporate sector, first-quarter 2011 productivity growth was revised down to 1.4 percent from the preliminary estimate of 4.1 percent. For the year 2010, productivity was revised down to 5.3 percent due to a downward revision in output. In 2009 productivity was revised down to 1.6 percent as the downward revision to output was greater than the downward revision to hours. Unit labor costs were unchanged by revisions in 2010 and 2009 because downward revisions to productivity were offset by downward revisions to hourly compensation.

The revised Productivity and Costs press release for second-quarter 2011 is scheduled to be released on Thursday, September 1, 2011 at 8:30 a.m. (EDT).

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