U.S. manufacturing productivity increased 5.3% in Q2

The U.S. Department of Labor’s Bureau of Labor Statistics on August 11 reported preliminary productivity data – as measured by output per hour of all persons – for the second quarter of 2009. The seasonally adjusted annual rates of productivity change in the second quarter were:

·        6.3 percent in the business sector and

·        6.4 percent in the non-farm business sector.

Productivity gains in both sectors were the largest since the third quarter of 2003, and were due to hours worked declining faster than output.

In manufacturing, the preliminary productivity changes in the second quarter were:

·        5.3 percent in manufacturing,

·        3.9 percent in durable goods manufacturing, and

·        2.0 percent in non-durable goods manufacturing.

The increases in productivity in all manufacturing sectors were the result of hours falling faster than output. Output and hours in manufacturing, which includes about 11 percent of U.S. business-sector employment, tend to vary more from quarter to quarter than data for the aggregate business and non-farm business sectors.

The data sources and methods used in the preparation of the manufacturing series differ from those used in preparing the business and non-farm business series, and these measures are not directly comparable. Output measures for business and non-farm business are based on measures of gross domestic product prepared by the Bureau of Economic Analysis of the U.S. Department of Commerce. Quarterly output measures for manufacturing reflect indexes of industrial production independently prepared by the Board of Governors of the Federal Reserve System.

Business

Business sector output per hour increased 6.3 percent from the first quarter to the second quarter of 2009, as output decreased 1.8 percent and hours of all persons engaged in the sector – employees, proprietors and unpaid family workers – fell 7.5 percent (seasonally adjusted annual rates). The productivity increase was the largest since the third quarter of 2003, when output per hour increased 8.4 percent. From the second quarter of 2008 to the second quarter of 2009 productivity grew 1.9 percent in the business sector, as output fell 5.4 percent and hours fell 7.1 percent. Business sector productivity had grown at an average annual rate of 2.6 percent from 2000 through 2008.

Hourly compensation edged up 0.1 percent in the second quarter of 2009 after falling 2.5 percent in the first quarter (seasonally adjusted annual rates). Hourly compensation increased 1.1 percent over the last four quarters. This measure of compensation includes accrued wages and salaries, supplements, employer contributions to employee benefit plans, and taxes.  Real hourly compensation, which takes into account changes in consumer prices, fell 1.2 percent during the second quarter of 2009 as consumer prices increased 1.3 percent (seasonally adjusted annual rates).

The change in unit labor costs approximates the change in hourly compensation less the change in productivity. Unit labor costs decreased at an annual rate of 5.8 percent during the second quarter of 2009. The implicit price deflator for the business sector, which reflects changes in unit labor costs and unit non-labor payments, decreased 0.1 percent in the second quarter of 2009 and increased 2.1 percent one quarter earlier.

Non-farm Business

Productivity increased 6.4 percent in the non-farm business sector during the second quarter of 2009, reflecting declines of 1.7 percent in output and 7.6 percent in hours (seasonally adjusted annual rates). The productivity gain was the largest since the third quarter of 2003, when

productivity grew at a 9.7 percent annual rate. Over the last four quarters non-farm hours have fallen 7.3 percent and output has declined 5.6 percent, yielding an increase of 1.8 percent in output per hour. Non-farm business productivity increased at an annual rate of 2.5 percent from 2000 through 2008.

Hourly compensation in the non-farm business sector increased 0.2 percent in the second quarter of 2009, compared to a decrease of 2.4 percent one quarter earlier. When the 1.3 percent rise in consumer prices was taken into account, real hourly compensation fell 1.1 percent in the second quarter of 2009 (seasonally adjusted annual rates).

Non-farm business unit labor costs fell 5.8 percent in the second quarter of 2009 due entirely to productivity improvement; hourly compensation increased slightly. These costs declined 0.6 percent over the last four quarters, as a 1.8 percent increase in output per hour was partially offset by

a 1.3 percent increase in compensation per hour. The implicit price deflator for non-farm business output decreased 0.2 percent in the second quarter of 2009 and increased 1.7 percent from the same quarter a year ago.

Manufacturing

Manufacturing productivity grew 5.3 percent in the second quarter of 2009, as output fell 9.9 percent and hours worked decreased 14.4 percent (seasonally adjusted annual rates). This was the largest quarterly gain in manufacturing productivity since the first quarter of 2005, when output per hour increased at a 7.3 percent annual rate. Over the last four quarters, manufacturing productivity declined 1.3 percent, as a 15.0 percent drop in output was largely offset by a 13.9 percent decline in hours worked. For the entire 2000-2008 period manufacturing productivity increased at a 3.3 percent annual rate.

In durable goods industries, productivity rose 3.9 percent in the second quarter of 2009, as output fell 16.5 percent and hours fell faster, -19.6 percent. This was the third consecutive quarter of double-digit declines in output and hours in the durable manufacturing sector. In non-durable goods industries, productivity grew 2.0 percent in the second quarter, reflecting declines in output and hours of 3.4 percent and 5.3 percent, respectively.

During the second quarter of 2009, hourly compensation grew 5.8 percent in total manufacturing, 8.7 percent in durable manufacturing and 2.0 percent in non-durable manufacturing (seasonally adjusted annual rates). As revised, manufacturing hourly compensation increased 2.2 percent in the first quarter; when consumer prices were taken into account, real hourly compensation of all manufacturing workers rose 4.4 percent in the second quarter, and 4.6 percent in the first quarter of 2009.

Unit labor costs in manufacturing increased 0.5 percent in the second quarter of 2009; a revised increase of 4.9 percent was reported for the first quarter of 2009. From the second quarter of 2008 to the second quarter of 2009, unit labor costs increased 7.4 percent.

Read the full report and view all of the data tables by clicking on the link below:

http://www.bls.gov/news.release/prod2.nr0.htm