For release 10:00 am (EDT) Thursday, May 19, 2011 USDL-11-0723
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PRELIMINARY MULTIFACTOR PRODUCTIVITY TRENDS - 2010
Private nonfarm business sector multifactor productivity increased at a 3.2
percent annual rate in 2010, the largest increase recorded in this series
which began in 1987, the U.S. Bureau of Labor Statistics reported today.
(See chart 1, table A.) The multifactor productivity gain in 2010 reflected
a 3.7 percent increase in output and a 0.5 percent increase in the combined
inputs of capital and labor. Capital services grew by 0.6 percent, the
smallest gain in the series which began in 1987. The combination of fast-
rising output and a modest increase in capital services caused output per
unit of capital services to jump 3.0 percent, the largest gain since the series
began in 1987. Labor input, the combined effect of hours worked and labor
composition, increased 0.5 percent in the private nonfarm business sector
after falling in the previous two years.
Multifactor productivity measures the change in output per unit of combined
capital and labor. Multifactor productivity is designed to measure the joint
influences of technological change, efficiency improvements, returns to scale,
reallocation of resources, and other factors on economic growth, allowing for
the effects of capital and labor. Multifactor productivity, therefore, differs
from labor productivity (output per hour worked) measures that BLS publishes
quarterly since it includes information on capital services and other data that
are not available on a quarterly basis. Additionally, multifactor productivity
measures for the private business and private nonfarm business sectors account
for shifts in the composition of labor. Estimates of labor composition are not
included in the quarterly labor productivity measures.
Private business sector multifactor productivity grew by 3.2 percent in 2010,
the largest gain in the series which began in 1987. (See table 2.) The
multifactor productivity gain in 2010 reflected a 3.7 percent increase in
output and a 0.6 percent increase in the combined inputs of capital and labor.
Historical trends in private nonfarm business
Multifactor productivity in private nonfarm business grew 1.0 percent annually
from 1987 to 2010. (See table A.) For the 2007-2010 period, multifactor
productivity grew 0.7 percent, primarily due to a 0.4 percent decline in output
coupled with a 1.1 percent decline in combined inputs. In contrast, the 3.2
percent increase in multifactor productivity in 2010 was a result of an
increase in output much larger than the increase in combined inputs. The 3.7
percent rise in output over the year represents the largest increase since
2004. (See table 1.)
Annual labor productivity growth can be viewed as the sum of three components:
multifactor productivity growth, the contribution of capital intensity, and
the contribution of shifts in labor composition. The historical relationship
between labor productivity growth and these three components can be seen in
chart 2 and table B. Chart 2 shows how output per hour shifted upwards after
the 1990-1995 period. In particular, the contribution of capital intensity to
labor productivity growth became more pronounced after 1995.
For the 2007-2010 period, the contribution of capital intensity increased at a
1.6 percent annual rate and the contribution of labor composition increased at
a 0.4 percent annual rate, faster than the gains seen in the 1995-2000 and
2000-2007 periods. Gains made in private nonfarm business output per hour due
to the rising contributions of capital intensity and of labor composition were
tempered by slower multifactor productivity growth. As a result, output per
hour was little changed during 2007-2010 compared to the two previous periods.
(See chart 2, table B.)
The methodology for measuring preliminary multifactor productivity for 2010 is
a simplified version of the methodology that BLS uses when more detailed
information is available. Measures will be revised in early 2012.
Table A. Compound annual growth rates for productivity, output, and inputs
in the private nonfarm business and private business sectors for selected
periods,1987-2010
In percent
1987- 1987- 1990- 1995- 2000- 2007- 2009-
2010 1990 1995 2000 2007 2010 2010
Private nonfarm business1
Productivity
Multifactor Productivity2 1.0 0.5 0.5 1.3 1.4 0.7 3.2
Output per hour of all
persons 2.3 1.4 1.6 2.8 2.6 2.8 3.6
Output per unit of
capital services -0.8 -0.4 -0.4 -1.0 -0.5 -1.9 3.0
Output 2.9 3.2 2.9 5.0 2.7 -0.4 3.7
Inputs
Combined inputs3 1.9 2.7 2.4 3.6 1.3 -1.1 0.5
Labor input4 1.1 2.3 2.0 2.5 0.4 -2.5 0.5
Hours 0.6 1.7 1.3 2.2 0.1 -3.1 0.1
Labor Composition5 0.5 0.6 0.7 0.3 0.3 0.6 0.4
Capital services 3.7 3.6 3.3 6.0 3.2 1.5 0.6
Analytic ratio
Capital services per
hour of all persons 3.1 1.9 1.9 3.8 3.2 4.7 0.4
Private business1
Productivity
Multifactor Productivity2 1.0 0.6 0.4 1.5 1.5 0.8 3.2
Output per hour of all
persons 2.3 1.6 1.5 2.9 2.7 2.8 3.6
Output per unit of
capital services -0.6 -0.4 -0.3 -0.7 -0.4 -1.8 3.0
Output 2.9 3.2 2.8 5.0 2.7 -0.3 3.7
Inputs
Combined inputs3 1.8 2.6 2.4 3.4 1.2 -1.1 0.6
Labor input4 1.0 2.1 2.0 2.3 0.3 -2.5 0.5
Hours 0.5 1.6 1.3 2.0 0.0 -3.0 0.1
Labor Composition5 0.5 0.6 0.7 0.3 0.3 0.6 0.3
Capital services 3.5 3.6 3.1 5.8 3.1 1.4 0.6
Analytic ratio
Capital services per
hour of all persons 3.0 2.0 1.8 3.7 3.1 4.6 0.5
1. Excludes government enterprises.
2. Output per unit of combined labor input and capital services.
3. The growth rate of each input is weighted by its share of current dollar
costs.
4. Hours at work by age, education, and gender group are weighted by each
group’s share of the total wage bill.
5. Ratio of labor input to hours.
Table B. Compound annual growth rates in output per hour of all persons
and the contributions of capital intensity, labor composition, and
multifactor productivity in the private nonfarm business and private
business sectors for selected periods, 1987-2010
In percent
1987- 1987- 1990- 1995- 2000- 2007- 2009-
2010 1990 1995 2000 2007 2010 2010
Private nonfarm business1
Output per hour
of all persons 2.3 1.4 1.6 2.8 2.6 2.8 3.6
Contribution of
capital intensity2 1.0 0.6 0.6 1.2 1.0 1.6 0.2
Contribution of
labor composition3 0.3 0.4 0.5 0.2 0.2 0.4 0.2
Multifactor
productivity4 1.0 0.5 0.5 1.3 1.4 0.7 3.2
Private business1
Output per hour
of all persons 2.3 1.6 1.5 2.9 2.7 2.8 3.6
Contribution of
capital intensity2 1.0 0.6 0.6 1.2 1.0 1.6 0.2
Contribution of
labor composition3 0.3 0.4 0.5 0.2 0.2 0.4 0.2
Multifactor
productivity4 1.0 0.6 0.4 1.5 1.5 0.8 3.2
1. Excludes government enterprises.
2. Capital services per hour multiplied by capital's share of current dollar
costs.
3. Labor composition multiplied by labor's share of current dollar costs.
4. Output per unit of combined labor input and capital services.
Multifactor productivity plus the contributions of capital intensity and
labor composition may not sum to output per hour due to independent
rounding.
U.S. Bureau of Labor Statistics