Labor Productivity and Costs

Overview

Mission

Two BLS programs produce Labor Productivity and Costs (LPC) measures for sectors of the U.S. economy.

The Major Sector Productivity program develops quarterly labor productivity measures for the major U.S. economic sectors including the business sector, the nonfarm business sector, nonfinancial corporations, and manufacturing, along with subsectors of durable and nondurable goods manufacturing.

The Industry Productivity program develops annual labor productivity and unit labor cost measures for U.S. industries.

Indexes of labor productivity show changes in the ratio of output to hours of labor input. These measures are used in economic analysis, public and private policymaking, and forecasting and analysis of prices, wages, and technological change.

However, labor productivity measures should not be interpreted as presenting the contribution of labor to production. Rather, changes over time in output or labor input may reflect the influence of other factors including variations in the characteristics and efforts of the work-force, changes in managerial skill, changes in the organization of production, changes in the allocation of resources between sectors, the direct and indirect effects of research and development, and new technology.

Other productivity measures produced by the Bureau of Labor Statistics include multifactor productivity measures for the major sectors of the U.S. economy and for 18 3-digit NAICS manufacturing industries; for 86 4-digit NAICS manufacturing industries, air transportation, and line-haul railroads. Multifactor productivity measures compare output to a combined set of inputs. These measures were developed initially in 1983 and reflect the role inputs other than labor play in output growth.

Background

Description of Measures

The Bureau of Labor Statistics produces labor productivity measures for major sectors as well as for selected industries.

For the major sectors, output, measured net of price change and inter-industry transactions, is compared to labor input, measured as hours at work in the sector. Output per hour and related measures of compensation per hour and unit labor costs are maintained for business and nonfarm business from 1947 to the present. Similar measures are also available for manufacturing (total, durable, and nondurable sectors) and for nonfinancial corporations. These measures are available quarterly and are updated and revised eight times a year.

For selected industries, productivity and related indexes; rates of change; and levels of industry employment, hours, nominal value of production and labor compensation are maintained. These measures are updated annually.

Coverage

Quarterly labor productivity measures are available for the following sectors:

Annual labor productivity measures for industries at the 2-, 3-, 4-, 5-, and 6- digit NAICS level are available from 1987 forward. Comprehensive coverage is available in mining, utilities, manufacturing, wholesale trade, retail trade, and accommodation and food services. Measures are also provided for selected industries in transportation and warehousing, information, finance and insurance, real estate and rental and leasing, professional and technical services, administrative and support services, health care and social services, and other services.

Uses

Data

Data Available

Data Sources

Output

Business sector output is an annual-weighted index constructed after excluding from gross domestic product (GDP) the following outputs: General government, nonprofit institutions, paid employees of private households, and the rental value of owner-occupied dwellings. Corresponding exclusions also are made in labor inputs. The nonfarm business sector output also excludes the farm sector. Gross domestic product data are prepared by the Bureau of Economic Analysis of the U.S. Department of Commerce as part of the National Income and Product Accounts.

Annual manufacturing output indexes are constructed by deflating the current-dollar industry value of production data from the Bureau of the Census with deflators from the Bureau of Economic Analysis. Quarterly manufacturing output measures are based on the index of industrial production prepared monthly by the Board of Governors of the Federal Reserve System, adjusted to be consistent with the annual indexes of manufacturing sector output prepared by the Bureau of Labor Statistics.

Industry output is measured as real sectoral output, the total value of goods and services leaving the industry. For most industries, real output is derived by deflating nominal sales using BLS price indexes. Industry output measures are constructed primarily using data from the economic censuses and annual surveys of the U.S. Census Bureau, U.S. Department of Commerce, together with information on price changes primarily from BLS. Industry output indexes are constructed as annual-weighted indexes that aggregate the growth rates of different industry outputs.

A more thorough discussion of the output data underlying major sector and industry labor productivity measures are available in Chapter 10, "Productivity Measures: Business Sector and Major Subsectors," and Chapter 11, "Industry Productivity Measures," of the BLS Handbook of Methods.

Labor

Hours and employment data for the major sector measures are primarily drawn from the BLS Current Employment Statistics (CES) program, which provides monthly survey data on total employment and average weekly hours of production and nonsupervisory workers in nonagricultural establishments. Jobs rather than persons are counted. Weekly paid hours are adjusted to hours at work using data from the National Compensation Survey (NCS). The BLS Hours at Work Survey (HWS) PDF (12K), conducted for this purpose, was used for years prior to 2001.( How to view a PDF file.) The Office of Productivity and Technology estimates average weekly hours at work for nonproduction and supervisory workers using information from the Current Population Survey (CPS), the CES, and the NCS.

Data from the BLS Current Population Survey are used for farm labor. In the nonfarm sector, the National Income and Product Accounts prepared by the Bureau of Economic Analysis of the Department of Commerce and the CPS are used to measure labor input for government enterprises, proprietors, and unpaid family workers. All series have been adjusted to take into account the activities of dual jobholders.

Hours and employment for the industry measures also rely primarily on data from the Current Employment Statistics (CES) survey, the Current Population Survey (CPS), and the National Compensation Survey (NCS). Data on employment and average weekly hours, along with ratios of hours worked to hours paid, are used to construct measures of total hours for different categories of workers. Employment and hours include those of paid employees, the self-employed (partners and proprietors) and unpaid family workers.

A more detailed discussion of the labor data underlying the major sector measures is available in Chapter 10, "Productivity Measures: Business Sector and Major Subsectors". For more information on the labor data underlying the industry productivity measures, see "Industry Hours and Employment".

Reference period

Last Modified Date: May 1, 2014

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