Preliminary Report: Productivity and Costs, Fourth Quarter and Annual Averages 2010

Washington, D.C.—(ENEWSPF)—February 3, 2011.  Nonfarm business sector labor productivity increased at a 2.6 percent annual rate during the fourth quarter of 2010, the U.S. Bureau of Labor Statistics reported today. This gain in productivity reflects increases of 4.5 percent in output and 1.8 percent in hours worked. (All quarterly percent changes in this release are seasonally adjusted annual rates.) Productivity increased 1.7 percent over the last four quarters (table A). Annual average productivity increased 3.6 percent from 2009 to 2010 (table C). Quarterly measures provide information on business cycles whereas annual measures are compared to long-term trends. 

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.

Unit labor costs in nonfarm businesses declined 0.6 percent in the fourth quarter of 2010, as the increase in productivity (2.6 percent) outpaced the increase in hourly compensation (1.9 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. Over the last four quarters, unit labor costs declined 0.2 percent, as hourly compensation and productivity increased 1.5 percent and 1.7 percent, respectively (table A). Annual average unit labor costs fell 1.5 percent from 2009 to 2010 (table C).

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Data in this release do not reflect the annual benchmark revision of the BLS 

Current Employment Statistics program data to be released February 4, 2011.

This benchmark will be incorporated in our next release on March 3, 2011.

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Manufacturing sector productivity grew 5.8 percent in the fourth quarter of 2010, as output rose 3.7 percent and hours worked declined 2.0 percent. From the fourth quarter of 2009 to the fourth quarter of 2010, manufacturing productivity increased 3.6 percent as output increased 6.4 percent and hours rose 2.7 percent (table A). Unit labor costs in manufacturing fell 2.9 percent in the fourth quarter of 2010 and decreased 3.0 percent from the same quarter a year ago (table A). Annual average productivity grew 6.0 percent from 2009 to 2010.

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.

Table C presents Annual Averages for the most recent five years. The nonfarm business sector experienced productivity growth of 3.6 percent from 2009 to 2010 and 3.5 percent from 2008 to 2009. However, the 2010 increase in output per hour was due to a 3.7 percent increase in output as hours edged up 0.1 percent, whereas the 2009 productivity gain resulted when output fell 3.8 

percent and hours fell 7.0 percent. In both years, strong productivity growth in nonfarm business was accompanied by declines in unit labor costs. By contrast the previous three years (2006-2008) were marked by modest productivity gains and increases in unit labor costs of more than two percent. 

In the manufacturing sector, productivity grew 6.0 percent in 2010, the largest annual increase in output per hour since 2003, when output per hour increased 6.3 percent. The 2010 productivity gain reflected a 6.6 percent increase in output combined with a 0.6 percent increase in hours. Productivity grew 8.2 percent in durable goods manufacturing and 3.5 percent in nondurable goods industries (tables 4 and 5). Unit labor costs in the manufacturing sector fell 4.5 percent–the largest decline in annual manufacturing unit labor costs since the series began in 1988. 

Revised measures 

Revised and previous measures for the third quarter of 2010 are found in tables B and D and cover the following major sectors: nonfarm business, business, manufacturing and nonfinancial corporations. In the third quarter of 2010, productivity growth was revised up to 2.4 percent in the nonfarm business sector and 1.4 percent in the manufacturing sector, when compared to the estimate published on December 1 (table B). In both sectors, output was revised up while hours were unrevised. Unit labor costs for the nonfarm business sector declined 0.1 percent in the third quarter, as previously reported. The increase in manufacturing unit labor costs was revised down to 0.1 percent from 1.0 percent. In the nonfinancial corporate sector productivity was revised down due to a downward revision in output; hours were revised down slightly (table D). 

Nonfinancial corporate sector data have been historically revised to incorporate the December 22, 2010 release by the Bureau of Economic Analysis of revised data on gross product in billions of chained (2005) dollars. 

Quarterly and annual data for all sectors from 2008 to 2010 appear in tables 1-6 and revised historical annual data for the nonfinancial corporate sector in appendix table 1. Full historical measures can be found on the productivity and costs home page http://www.bls.gov/lpc/#data. 

To view the tables reference in this report, see: http://www.bls.gov/news.release/prod2.nr0.htm

Source: bls.gov