Economic News Release

Technical notes



                        TECHNICAL NOTES
                        
                        
Labor Hours: Hours data for the labor productivity and cost measures 
include hours 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. 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). The BLS Hours at Work survey, conducted 
for this purpose, was used 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 for farm labor, nonfarm proprietors, 
and nonfarm unpaid family workers. Estimates of labor input 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.
     The CES measures jobs, counting a person who is employed by two 
or more establishments at each place of employment. In contrast, the 
CPS features measures of employment that count each person only once 
and classify each person according to his or her primary job; hours 
worked at all jobs by that person accrue to his or her primary job. 
However, the CPS also collects more detailed information on 
employment and hours worked at primary jobs and all other jobs, 
separately. The BLS productivity measures use the more detailed 
information on employment and hours to assign all hours worked to the 
correct industrial sector and avoid duplicating hours data from the 
CES.

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 2013. 
Nonfarm business, which excludes farming, accounted for about 74 
percent of GDP in 2013.
     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 
index 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. 
Durables include the following 3-digit NAICS industries: wood product 
manufacturing; nonmetallic mineral product manufacturing; primary 
metal manufacturing; fabricated metal product manufacturing; 
machinery manufacturing; computer and electronic product 
manufacturing; electrical equipment and appliance manufacturing; 
transportation equipment manufacturing; furniture and related product 
manufacturing; and miscellaneous manufacturing. Nondurables include: 
food manufacturing; beverage and tobacco product manufacturing; 
textile mills; textile product mills; apparel manufacturing; leather 
and allied product manufacturing; paper manufacturing; printing and 
related support activities; petroleum and coal products 
manufacturing; chemical manufacturing; and plastics and rubber 
products manufacturing.
     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 2013.
     
Productivity: These productivity measures describe the relationship 
between real 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 these measures relate output 
to hours at work of all persons engaged in a sector, they do not 
measure the specific contribution of labor, capital, or any other 
factor of production. Rather, 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: The measures of unit labor costs in this release 
describe the relationship between compensation per hour and 
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. 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)
      
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: September 04, 2014
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