Technical Note

Labor Productivity: The industry labor productivity measures describe the relationship between 
industry output and the labor time involved in its production.  They show the changes from period to 
period in the amount of goods and services produced per hour. Although the labor productivity measures 
relate output to hours of all persons in an industry, they do not measure the specific contribution of labor 
or any other factor of production.  Rather, they reflect the joint effects of many influences, including 
changes in technology; capital investment; utilization of capacity, energy, and materials; the use of 
purchased services inputs, including contract employment services; the organization of production; 
managerial skill; and the characteristics and effort of the workforce.

Output:  Industry output is measured as an annual-weighted index of the changes in the various 
products (in real terms) provided for sale outside the industry. Real industry output is usually derived by 
deflating nominal sales or values of production using BLS price indexes, but for some industries it is 
measured by physical quantities of output. For manufacturing industries, industry output reflects sectoral 
value of production, derived by adjusting shipments for changes in inventories and removing intra-
industry transactions.

Industry output measures are constructed primarily using data from the economic censuses and annual 
surveys of the Census Bureau, U.S. Department of Commerce, together with information on price 
changes primarily from BLS.  

Labor Hours:  The primary source of data on industry employment and hours is the BLS Current 
Employment Statistics (CES) survey. The CES provides monthly data on the number of total and 
production worker jobs held by wage and salary workers in nonfarm establishments, as well as data on 
the average weekly hours of production workers in those establishments. CES data are supplemented 
with data from the Current Population Survey (CPS) to estimate employment and hours of self-
employed and unpaid family workers in each industry. Data from the CPS, together with the CES data, 
are also used to estimate the historical average weekly hours of nonproduction workers for each industry. 
CES and CPS data are supplemented or further disaggregated for some industries using data from the 
BLS Quarterly Census of Employment and Wages (QCEW), the Bureau of the Census, or other sources. 
Hours of all persons in an industry are treated as homogeneous and are directly aggregated.

Unit Labor Costs:  Unit labor costs represent the cost of labor required to produce one unit of output.  
The unit labor cost indexes are computed by dividing an index of industry labor compensation by an 
index of real industry output.  Unit labor costs also describe the relationship between compensation per 
hour and real output per hour (labor productivity). Increases in hourly compensation increase unit labor 
costs; increases in labor productivity offset compensation increases and lower unit labor costs. 
      
Compensation, defined as payroll plus supplemental payments, is a measure of the cost to the employer 
of securing the services of labor. Payroll includes salaries, wages, commissions, dismissal pay, bonuses, 
vacation and sick leave pay, and compensation in kind.  Supplemental payments include legally required 
expenditures and payments for voluntary programs. The legally required portion consists primarily of 
Federal old age and survivors’ insurance, unemployment compensation, and workers’ compensation. 
Payments for voluntary programs include all programs not specifically required by legislation, such as the 
employer portion of private health insurance and pension plans.
      
Revisions: This news release incorporates data from the 2009 Annual Survey of Manufactures (ASM) 
and the November 2010 Subject Series Revision to the 2007 Economic Census, both published by the 
Census Bureau. The labor productivity and output series for all industries have been revised for 2008 
and earlier years as a result. This news release also incorporates the annual benchmark revision of the 
BLS Current Employment Statistics (CES) survey published in February 2011. The industries included 
in this release are classified according to the 2007 NAICS. All of the measures for 2009 in this release 
are preliminary and subject to revision.

Additional Information: While the rates of change reported by BLS in this news release are rounded to 
one decimal place, all industry productivity percent changes are calculated using index numbers rounded 
to three decimal places.

Year-to-year movements in industry productivity may be erratic, particularly in smaller industries. The 
annual measures based on sample data may differ from measures generated by a census of 
establishments in the industry. Annual changes in an industry’s output and use of labor may reflect 
cyclical changes in the economy as well as long-term trends. As a result, long-term productivity trends 
tend to be more reliable indicators of industry performance than year-to-year changes.

Industry productivity and related indexes and rates of change can be accessed online by visiting the 
Labor Productivity and Costs web site at www.bls.gov/lpc. Levels of industry employment, hours, labor 
compensation, and value of production, and the implicit price deflator for output for these industries, are 
available by calling the Division of Industry Productivity Studies (202-691-5618) or by sending an 
e-mail to dipsweb@bls.gov. Information in this report will be made available to sensory-impaired 
individuals upon request. Voice phone: 202-691-5618; TDD message referral phone number: 1-800-877-
8339.

To subscribe to the industry productivity program’s electronic notification service, send an e-mail to 
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