PRODUCTIVITY AND COSTS
First Quarter 2023, Revised
Nonfarm business sector labor productivity decreased 2.1 percent in the first quarter of 2023, the U.S.
Bureau of Labor Statistics reported today, as output increased 0.5 percent and hours worked increased 2.6 percent. (All quarterly percent changes in this release are seasonally adjusted annual rates.) Labor productivity was revised up 0.6 percentage point, the combined effect of a 0.3-percentage point upward revision to output and a 0.4-percentage point downward revision to hours worked. From the same quarter a year ago, nonfarm business sector labor productivity decreased 0.8 percent, reflecting a 1.4percent increase in output and a 2.2-percent increase in hours worked. (See chart 1 and table A1.) The 0.8-percent productivity decline is the first time the four-quarter change series has remained negative for five consecutive quarters; this series begins in the first quarter of 1948.
Unit labor costs in the nonfarm business sector increased 4.2 percent in the first quarter of 2023, reflecting a 2.1-percent increase in hourly compensation and a 2.1-percent decrease in productivity. Unit labor costs increased 3.8 percent over the last four quarters. (See chart 2 and tables A1 and 2.)
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 productivity tend to reduce them. Real hourly compensation, which takes into account consumer prices, decreased 1.7 percent in the first quarter of 2023, and declined 2.6 percent over the last four quarters.
Labor productivity, or output per hour, is calculated by dividing an index of real output by an index of hours worked by all workers, including employees, proprietors, and unpaid family workers. During the current business cycle, starting in the fourth quarter of 2019, labor productivity has grown at an annualized rate of 1.1 percent, reflecting a 1.9-percent rate of growth in output and a 0.8-percent rate of growth in hours worked during the business cycle. (See chart 3.) The 1.1-percent rate of productivity growth in the current business cycle thus far is a historically low productivity growth rate; no other previous business cycle had lower productivity growth, except for the brief six-quarter cycle from firstquarter 1980 to third-quarter 1981, which exhibited 1.0 percent growth.
Productivity – Chart 3 – 1st Quarter 2023 Revised
Manufacturing sector labor productivity decreased 2.5 percent in the first quarter of 2023, as output decreased 1.0 percent and hours worked increased 1.6 percent. In the durable manufacturing sector, productivity decreased 5.6 percent, with a 3.2-percent decrease in output and a 2.5-percent increase in hours worked. Nondurable manufacturing sector productivity increased 1.3 percent, as output increased 1.4 percent and hours worked were unchanged. Total manufacturing sector productivity decreased 1.6 percent from the same quarter a year ago. (See tables A1, 3, 4, and 5.)
Unit labor costs in the total manufacturing sector increased 3.1 percent in the first quarter of 2023, reflecting a 0.5-percent increase in hourly compensation and a 2.5-percent decrease in productivity. Manufacturing unit labor costs increased 4.5 percent from the same quarter a year ago. (See tables A1 and 3.)
Manufacturing sector labor productivity has declined at an annualized rate of 0.1 percent during the current business cycle, which began in the fourth quarter of 2019. This rate reflects output and hours worked growing at annualized rates of 0.2 percent and 0.3 percent, respectively, over the same period. (See chart 4.) This is a historically low productivity growth rate and follows the 0.0-percent annual rate of the last business cycle from fourth-quarter 2007 through fourth-quarter 2019.
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. (See page 7.)
Preliminary first-quarter 2023 measures were announced today for the nonfinancial corporate sector. Productivity decreased 4.3 percent in the first quarter of 2023 as output decreased 1.9 percent and hours worked increased 2.5 percent. Productivity decreased 2.2 percent over the last four quarters. (See table
Measures released today are based on more recent source data than were available for the preliminary report; they reflect regular updates of source data from the BLS, the Bureau of Economic Analysis (BEA), and the Board of Governors of the Federal Reserve System.
Table B1 presents previous and revised productivity and related measures for the business, nonfarm business, and manufacturing sectors for the first quarter of 2023.
In the first quarter of 2023, nonfarm business sector productivity decreased 2.1 percent, a smaller decline than the previously reported decrease of 2.7 percent. Output was revised up 0.3 percentage point and hours worked were revised down 0.4 percentage point. Unit labor costs increased 4.2 percent rather than increasing 6.3 percent as previously reported, reflecting a 1.3-percentage point downward revision to hourly compensation and a 0.6-percentage point upward revision to labor productivity. In the manufacturing sector, productivity was revised down from a 1.3-percent decrease to a 2.5-percent decrease, reflecting a 1.5-percentage point downward revision to output and a 0.2-percentage point downward revision to hours worked. Manufacturing unit labor costs increased 3.1 percent rather than the preliminary estimate of 3.4 percent, as a 1.6-percentage point downward revision to hourly compensation was largely offset by a 1.2-percentage point downward revision to productivity.
Table B2 shows previous and revised productivity and related measures for the business, nonfarm business, manufacturing, and nonfinancial corporate sectors for the fourth quarter of 2022.
In the fourth quarter of 2022, labor productivity in the nonfarm business sector was unrevised, retaining the 1.6-percent increase reported last month. Hourly compensation, however, was revised down from the previously reported increase of 4.9 percent to a decrease of 0.7 percent, due entirely to a downward revision to compensation. As a result, unit labor costs decreased 2.2 percent in the fourth quarter of 2022, rather than increasing 3.3 percent. Labor productivity in the total manufacturing sector was revised down 0.2-percentage point to a decrease of 3.2 percent, the result of a 0.3-percentage point downward revision to output, which contracted at a 3.7 percent rate. Hours worked were unrevised, decreasing 0.5 percent in the fourth quarter. Hourly compensation was revised down 4.9 percentage points to a 0.1-percent decrease; this led to a 4.8-percentage point downward revision to unit labor costs, from an increase of 8.0 percent to an increase of 3.2 percent.
In the nonfinancial corporate sector, productivity fell 2.1 percent in the fourth quarter of 2022 rather than rising 0.7 percent as previously reported, due to a 2.8-percentange point downward revision to output. Hours worked were unrevised, increasing at a 1.2 percent rate. Annual average productivity in the nonfinancial corporate sector decreased 2.2 percent in 2022, rather than the preliminary estimate of 2.0 percent. Nonfinancial corporate sector productivity has grown at an annualized rate of 0.4 percent in the current business cycle. This rate is the lowest cyclical rate for this series, which begins in the first quarter of 1947.
Quarterly and annual data for all sectors for recent years appear in tables 1-6. Full historical annual and quarterly measures can be found at www.bls.gov/productivity/tables/.
The preliminary Productivity and Costs news release for second-quarter 2023 is scheduled to be released on Thursday, August 3, 2023, at 8:30 a.m. (ET).
Article Courtesy of the US Bureau of Labor Statistics