Research >> Economics

3Q2018 Productivity Growth Increased 2.3%


Nonfarm business sector labor productivity increased 2.3 percent during the third quarter of 2018, the U.S. Bureau of Labor Statistics reported today, as output increased 4.1 percent and hours worked increased 1.8 percent. (All quarterly percent changes in this release are seasonally adjusted annual rates.) From the third quarter of 2017 to the third quarter of 2018, productivity increased 1.3 percent, reflecting a 3.7-percent increase in output and a 2.3-percent increase in hours worked.

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

Unit labor costs in the nonfarm business sector increased 0.9 percent in the third quarter of 2018, reflecting a 3.1-percent increase in hourly compensation and a 2.3-percent increase in labor productivity. Unit labor costs also increased 0.9 percent over the last four quarters.

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 output per hour tend to reduce them.

Manufacturing sector labor productivity increased 1.0 percent in the third quarter of 2018, as output increased 4.1 percent and hours worked increased 3.1 percent. Productivity increased 1.7 percent in the durable manufacturing sector, as output rose 5.2 percent and hours worked increased 3.5 percent. In the non-durable goods manufacturing sector, a 0.5-percent rise in productivity reflected a 2.9-percent increase in output and a 2.4-percent increase in hours worked. Over the last four quarters, total manufacturing sector productivity increased 1.4 percent, as output increased 3.6 percent and hours worked increased 2.1 percent. Unit labor costs in manufacturing decreased 1.2 percent in the third quarter of 2018 and also decreased 1.2 percent from the same quarter a year ago.

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 third-quarter 2018 measures of productivity and costs were announced for the nonfinancial corporate sector. Productivity increased at a 5.5-percent annual rate in the third quarter of 2018 and increased 1.9 percent over the last four quarters. Unit labor costs decreased 2.1 percent in the third quarter of 2018 and were unchanged (0.0 percent) over the last four quarters. Unit profits--a measure available only for the nonfinancial corporate sector--increased at a 14.4-percent annual rate in the third quarter of 2018. A four-quarter increase in unit profits of 11.1 percent is the largest since the first quarter of 2012, when the measure increased 18.8 percent.

Revised measures
Measures released today are based on more recent source data than were available for the preliminary report. Regular updates of source data from the BLS, the Bureau of Economic Analysis (BEA), and the Board of Governors of the Federal Reserve System are reflected in data for the second and third quarters of 2018.

Table B1 presents revised and previous productivity and related measures for the nonfarm business, business, and manufacturing sectors for the third quarter of 2018. Revised quarterly and annual series for all sectors in recent years appear in tables 1-6.

In the third quarter of 2018, nonfarm business labor productivity increased 2.3 percent--about the same as the preliminary estimate of 2.2 percent--as both output and hours worked increased at the same rates reported November 1. Unit labor costs were revised down 0.3 percentage point due primarily to a downward revision to hourly compensation. In the manufacturing sector, productivity increased 1.0 percent rather than 0.5 percent as previously reported, as an upward revision to output was greater than an upward revision to hours worked. Unit labor costs were revised from a 0.9-percent increase to a 1.2-percent decline for the third quarter of 2018--the combined effect of the upward revision to productivity and a downward revision to hourly compensation.

Table B2 shows previous and revised productivity and related measures for the nonfarm business, business, manufacturing and nonfinancial corporate sectors for the second quarter of 2018.

In the second quarter of 2018, labor productivity, output, and hours worked were unrevised for the nonfarm business sector. Unit labor costs decreased 2.8 percent, rather than decreasing 1.0 percent as previously reported, due to a downward revision to hourly compensation. Productivity, output, and hours worked were also unrevised in the manufacturing sector. A large downward revision to manufacturing hourly compensation resulted in a similar downward revision to unit labor costs; after revision, unit labor costs fell 6.1 percent in the second quarter of 2018, in contrast to the 0.1 percent increase reported previously. In the nonfinancial corporate sector, productivity decreased 1.9 percent rather than 0.9 percent as reported November 1, due solely to a downward revision to output; hours were unrevised. Because hourly compensation was revised down by more than productivity, unit labor costs increased less than previously reported.






Posted: December 6, 2018 Thursday 08:30 AM




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