Productivity, Labor Costs Rise In 3Q

Nonfarm business sector labor productivity increased at a 2.0 percent annual rate during the third quarter of 2014, the U.S. Bureau of Labor Statistics reported today, as output increased 4.4 percent and hours worked increased 2.3 percent. (All quarterly percent changes...

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Nonfarm business sector labor productivity increased at a 2.0 percent annual rate during the third quarter of 2014, the U.S. Bureau of Labor Statistics reported today, as output increased 4.4 percent and hours worked increased 2.3 percent. (All quarterly percent changes in this release are seasonally adjusted annual rates.) From the third quarter of 2013 to the third quarter of 2014, productivity rose 0.9 percent as output and hours worked increased 3.0 percent and 2.1 percent, respectively.

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 the nonfarm business sector rose 0.3 percent in the third quarter of 2014, as a 2.3 percent increase in hourly compensation was larger than the 2.0 percent increase in productivity. Unit labor costs increased 2.4 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 productivity increased 3.2 percent in the third quarter of 2014, as output increased 4.1 percent and hours worked increased 0.8 percent. In the durable goods manufacturing sector, productivity grew 4.2 percent, reflecting a 6.6 percent increase in output and a 2.3 percent increase in hours. In nondurable goods industries, productivity grew 3.0 percent, as output increased 1.2 percent and hours worked fell 1.8 percent. Over the last four quarters, manufacturing productivity increased 2.8 percent, as output increased 4.4 percent and hours increased 1.5 percent. Unit labor costs in manufacturing decreased 0.7 percent in the third quarter of 2014 and increased 0.6 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.

Revised measures 

Revised and previous measures for the second quarter of 2014 cover the following major sectors: nonfarm business, business, manufacturing, and nonfinancial corporations.

In the second quarter of 2014, nonfarm business sector productivity increased 2.9 percent, rather than 2.3 percent as reported September 4. The revised figure reflects an upward revision to output and a small downward revision to hours worked. Unit labor costs decreased 0.5 percent during the second quarter--rather than decreasing 0.1 percent as previously reported--due to the upward revision to productivity. In the manufacturing sector, productivity growth was revised up to 3.5 percent due to both an upward revision to output and a small downward revision to hours. Unit labor costs decreased 1.8 percent, a larger decrease than previously reported.

Second-quarter 2014 measures of productivity and costs were revised for the nonfinancial corporate sector. Productivity increased 4.0 percent rather than the preliminary estimate of 3.1 percent.  

Complete annual and quarterly data series can be found on the Productivity and Costs home page: www.bls.gov/lpc/#data.

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