Non-farm business sector labor productivity increased at a 6.9 percent annual rate during the fourth quarter of 2009, the U.S. Bureau of Labor Statistics reported on March 4. The gain in productivity reflects a 7.6 percent increase in output partially offset by a 0.6 percent increase in hours worked. (All quarterly percent changes in this release are seasonally adjusted annual rates.) From the fourth quarter of 2008 to the fourth quarter of 2009, productivity increased 5.8 percent as output declined 0.2 percent and hours fell 5.7 percent. The annual measure of productivity increased 3.8 percent from 2008 to 2009.
Labor productivity, or output per hour, is calculated by dividing an index of real output by an index of hours of all persons, including employees, proprietors and unpaid family workers.
Unit labor costs in non-farm businesses fell 5.9 percent in the fourth quarter of 2009, the result of productivity increasing faster than hourly compensation. Unit labor costs decreased 4.7 percent from the same quarter a year ago, the largest four-quarter decline since the series began in 1948. The annual average index of unit labor costs declined 1.7 percent from 2008 to 2009, the largest decline in that series.
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.
Manufacturing sector productivity rose 6.6 percent in the fourth quarter of 2009, as output increased 5.5 percent and hours decreased 1.0 percent. Productivity grew 6.8 percent in the durable goods industries and 6.4 percent in the nondurable goods industries. Over the last four quarters, manufacturing productivity increased 6.1 percent as output declined 4.6 percent and hours worked fell 10.1 percent. Unit labor costs in manufacturing declined 6.3 percent in the fourth quarter of 2009 and decreased 4.7 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 non-farm business output series, and these measures are not directly comparable.
Revised measures
Quarterly and annual measures for all sectors were revised back to 2005 to incorporate the annual benchmark adjustment and updated information on seasonal trends from the BLS non-farm payroll series. Hours and related measures for the business and non-farm business sectors were revised to incorporate updated information on seasonal trends in Current Population Survey data on hours worked. Revised and previous measures for the third and fourth quarters of 2009 are shown in table B for the business, non-farm business and manufacturing sectors and table C for the third quarter measures for the nonfinancial corporate sector. Quarterly and annual data for all sectors appear in tables 1-6 for 2007 through 2009, and in appendix tables 1-6 for 2005 and 2006. 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 fourth quarter of 2009, non-farm business productivity growth was revised up to 6.9 percent from the estimate of 6.2 percent published on February 4, 2010. The larger productivity gain reflects a 0.4 percentage point upward revision to output and a similar downward revision to hours. Unit labor costs for non-farm business fell 5.9 percent – more than previously reported. In manufacturing, productivity was revised down from 7.8 percent to 6.6 percent due to a downward revision to output and a smaller decline in hours than in the preliminary estimate.
In the third quarter of 2009, non-farm business productivity was revised up to 7.8 percent from 7.2 percent when hours were revised downward and output was not revised. A large downward revision to unit labor costs was due more to the large downward revision in hourly compensation than the small upward revision in output per hour. In manufacturing, productivity was revised up slightly. As in the non-farm business sector, there were large downward revisions to hourly compensation and unit labor costs. Productivity in nonfinancial corporations was revised down for the third quarter, as output was revised down much more than hours.
Table D presents Annual Averages for the most recent five years. In the non-farm business sector, productivity increased 3.8 percent in 2009, and reflected the largest annual declines in output and hours (-3.6 percent and -7.1 percent, respectively) for these measures, which begin in 1948. Unit labor costs fell over the year, by 1.7 percent, as hourly compensation grew less than productivity. Over the long run, from 2000 to 2009, non-farm business productivity increased at an average annual rate of 2.7 percent.
Manufacturing sector productivity grew 1.8 percent in 2009, due to a slightly larger decline in hours (-12.6 percent) than in output (-11.1 percent). These were the largest annual declines in the output and hours series, which begin in 1988. Unit labor costs in manufacturing increased 2.6 percent in 2009, in contrast to the decline in the non-farm business sector. Manufacturing productivity increased at an average annual rate of 3.2 percent from 2000 to 2009.
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