Economic News Release

Technical notes





                            TECHNICAL NOTES

                            
Labor Hours: Hours data for the labor productivity and cost measures include 
hours worked for all persons working in the sector—wage and salary workers, 
the self-employed and unpaid family workers. The primary source of hours and 
employment data is the BLS Current Employment Statistics (CES) program, which 
provides monthly survey data on the number of jobs held by wage and salary 
workers in nonfarm establishments, counting a person who is employed by two 
or more establishments at each place of employment. The CES also provides 
average weekly paid hours of production and nonsupervisory workers in these 
establishments. Weekly paid hours are adjusted to hours at work using data 
from the National Compensation Survey (NCS) for 2001 forward and data from 
the BLS Hours at Work survey, conducted for this purpose, for earlier years. 
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 CPS are used to estimate hours worked for farm labor, 
nonfarm proprietors, and nonfarm unpaid family workers. Using CPS information 
on employment and hours worked at primary jobs and all other jobs, 
separately, the BLS productivity measures assign all hours worked to the 
correct industrial sector. Hours for government enterprises are derived from 
the CPS, the CES, and the National Income and Product Accounts (NIPA) 
prepared by the Bureau of Economic Analysis (BEA) of the Department of 
Commerce.

Output: Business sector output is a chain-type, current-weighted index 
constructed after excluding from gross domestic product (GDP) the following 
outputs: general government, nonprofit institutions, and private households 
(including owner-occupied housing). Corresponding exclusions also are made in 
labor inputs. Business output accounted for about 76 percent of the value of 
GDP in 2014. Nonfarm business, which excludes farming, accounted for about 75 
percent of GDP in 2014.
     Annual indexes for manufacturing and its durable and nondurable goods 
components are constructed by deflating current-dollar industry value of 
production data from the U.S. Bureau of the Census with deflators from the 
BLS. These deflators are based on data from the BLS producer price program 
and other sources. The industry shipments are aggregated using annual 
weights, and intrasector transactions are removed. Quarterly manufacturing 
output measures are based on the indexes of industrial production prepared 
monthly by the Board of Governors of the Federal Reserve System, adjusted to 
be consistent with annual indexes of manufacturing sector output prepared by 
BLS. 
     Nonfinancial corporate output is a chain-type, current-weighted index 
calculated on the basis of the costs incurred and the incomes earned from 
production.  The output measure excludes the following outputs from GDP: 
general government; nonprofit institutions; private households; 
unincorporated business; and those corporations classified as offices of bank 
holding companies, offices of other holding companies, or offices in the 
finance and insurance sector. Nonfinancial corporations accounted for about 
49 percent of the value of GDP in 2014.
     
Labor Productivity: The measure describes the relationship between real 
output and the labor time involved in its production. Measures of labor 
productivity growth show the changes from period to period in the amount of 
goods and services produced per hour worked. They reflect the joint effects 
of many influences, including changes in technology; capital investment; 
level of output; utilization of capacity, energy, and materials; the 
organization of production; managerial skill; and the characteristics and 
effort of the work force.

Labor Compensation: The measure includes accrued wages and salaries, 
supplements, employer contributions to employee benefit plans, and taxes. 
Estimates of labor compensation by major sector, required for measures of 
hourly compensation and unit labor costs, are based primarily on employee 
compensation data from the NIPA, prepared by the BEA. The compensation of 
employees in general government, nonprofit institutions and private 
households are subtracted from compensation of domestic employees to derive 
employee compensation for the business sector. The labor compensation of 
proprietors cannot be explicitly identified and must be estimated. This is 
done by assuming that proprietors have the same hourly compensation as 
employees in the same sector. The quarterly labor productivity and cost 
measures do not contain estimates of compensation for unpaid family workers.  
      
Unit Labor Costs: These measures describe the relationship between 
compensation per hour and labor productivity, or real output per hour, and 
can be used as an indicator of inflationary pressure on producers. Increases 
in hourly compensation increase unit labor costs; labor productivity 
increases offset compensation increases and lower unit labor costs. 

Presentation of the data: The quarterly data in this release are presented in 
three ways: as percent changes from the previous quarter presented at a 
compound annual rate, as percent changes from the corresponding quarter of 
the previous year, and as index number series where 2009=100. Annual data are 
presented both as index number series and percent changes from the previous 
year.  
        The index numbers and rates of change reported in the productivity and 
costs news release are rounded to one decimal place. All percent changes in 
this release and on the BLS web site are calculated using index numbers to 
three decimal places. A complete historical series of these index numbers are 
available at the BLS web site, www.bls.gov/data/home.htm, or by contacting 
the BLS Division of Major Sector Productivity (Telephone 202-691-5606 or 
email DPRWEB@BLS.GOV).

For a more detailed explanation of methodology see "Technical Information 
About the Major Sector Productivity and Costs Methods" at 
www.bls.gov/lpc/lpcmethods.pdf.
      
Information in this release will be made available to sensory-impaired 
individuals upon request. Voice phone: 202-691-5606; Federal Relay Service 
number: 1-800-877-8339.

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Last Modified Date: August 11, 2015
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