Economic News Release

Preliminary multifactor productivity trends, 2014

For release 10:00 am    (EDT) Tuesday, June 23, 2015	      USDL-15-1235
Technical information:	(202) 691-5606  •  mfpweb@bls.gov  •  www.bls.gov/mfp
Media contact:	        (202) 691-5902  •  PressOffice@bls.gov 
PRELIMINARY MULTIFACTOR PRODUCTIVITY TRENDS – 2014

Private nonfarm business sector multifactor productivity increased at a
0.8 percent annual rate in 2014, the U.S. Bureau of Labor Statistics 
reported today. (See chart 1, table A.) This 2014 gain reflected a 
3.1-percent increase in output and a 2.3-percent increase in the combined
inputs of capital and labor. Capital services grew by 2.1 percent and 
labor input – which is the combined effect of hours worked and labor 
composition – grew by 2.4 percent. The 2.1-percent increase in capital 
services was the largest annual increase since a 2.6-percent increase in
2008. Capital services per hour of all persons continued on a steady 
decline of 0.1 percent in 2014; the fourth consecutive decline in this 
measure. (See table 1.)

Multifactor productivity measures the change in output relative to the 
change in capital and labor inputs used to produce that output. It is 
designed to measure the joint influences of technological change, 
efficiency improvements, returns to scale, reallocation of resources, 
and other factors of economic growth, accounting for the effects of 
capital and labor. Multifactor productivity annual measures differ from
BLS quarterly labor productivity (output per hour worked) measures because
the former also include the influences of capital services and shifts in 
the composition of the workforce. Additionally, much of the source data 
needed to construct multifactor productivity measures are not available 
on a quarterly basis.

Private business sector multifactor productivity grew by 0.6 percent in 
2014. A 2.9-percent increase in output and a 2.3-percent increase in the
combined inputs of capital and labor contributed to the multifactor 
productivity gain in 2014. (See table A, table 2.)
 
Historical trends in the private nonfarm business sector

Multifactor productivity in the private nonfarm business sector grew 
0.9 percent annually from 1987 to 2014. For the 2007-2014 period, multifactor
productivity grew 0.5 percent on average as combined inputs increased 0.7 
percent and output increased 1.3 percent. The increase in combined inputs 
reflected an increase in labor input of 0.3 percent along with a 1.5-percent
increase in capital services. (See table A, 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. Prior to 1995, multifactor 
productivity and the contributions of capital intensity to labor productivity
grew 0.5 percent and 0.7 percent respectively. The contribution of labor 
composition grew 0.4 percent, leading to an average annual growth rate of 1.6
percent in output per hour. 

The contributions to labor productivity growth differed from the 1995-2000 
and 2000-2007 periods, as upward shifts in multifactor productivity and 
capital intensity resulted in stronger output per hour growth. For the 
2007-2014 period, the contribution of capital intensity and the contribution
of labor composition amounted to 0.6 percent and 0.3 percent, respectively.
Additionally, the growth in multifactor productivity of 0.5 percent 
contributed to an overall growth of output per hour of 1.4 percent. 
(See chart 2, table B.) 

In 2014, annual labor productivity growth was less than half the average 
annual rate of change from 1987 to 2014 for the fourth consecutive year.
The contributions of capital intensity and labor composition in the private
nonfarm business sector in 2014 were little changed. The main component of 
the 0.8-percent increase in output per hour was the 0.8-percent increase in
multifactor productivity. (See table B, table 1.)

The methodology for measuring preliminary multifactor productivity for 2014 
is a simplified version of the methodology that BLS uses when more detailed 
data are available. Measures will be revised early in the next calendar year. 

Table A.  Compound average growth rates for productivity, output, and inputs
in the private nonfarm business and private business sectors for selected
periods,1987-2014

In percent


                            1987-  1987-  1990-  1995-  2000-  2007-  2013-
                            2014   1990   1995   2000   2007   2014   2014

Private nonfarm business1

Productivity
  Multifactor Productivity2  0.9    0.5    0.5    1.4    1.4    0.5    0.8
    Output per hour of all
      persons                2.1    1.6    1.6    2.9    2.6    1.4    0.8
    Output per unit of
      capital services      -0.4   -0.5   -0.4   -0.8   -0.4   -0.2    0.9


Output                       2.9    3.3    3.0    5.0    2.8    1.3    3.1


Inputs

  Combined inputs3           2.0    2.8    2.4    3.6    1.4    0.7    2.3
   Labor input4              1.3    2.3    2.0    2.4    0.5    0.3    2.4
     Hours                   0.8    1.7    1.3    2.1    0.2   -0.2    2.2
     Labor Composition5      0.5    0.6    0.7    0.3    0.3    0.5    0.2
   Capital services          3.4    3.8    3.4    5.9    3.3    1.5    2.1

Analytic ratio
  Capital services per
    hour of all persons      2.5    2.1    2.0    3.7    3.1    1.6   -0.1


Private business1

Productivity
  Multifactor Productivity2  1.0    0.6    0.5    1.6    1.4    0.5    0.6
    Output per hour of all
      persons                2.1    1.7    1.6    3.0    2.7    1.4    0.6
    Output per unit of
      capital services      -0.4   -0.5   -0.3   -0.6   -0.4   -0.2    0.8


Output                       2.9    3.3    2.9    5.1    2.8    1.3    2.9


Inputs

  Combined inputs3           1.9    2.7    2.4    3.4    1.4    0.7    2.3
   Labor input4              1.2    2.1    2.1    2.3    0.5    0.3    2.4
     Hours                   0.8    1.5    1.4    2.0    0.1   -0.1    2.3
     Labor Composition5      0.5    0.6    0.7    0.3    0.3    0.5    0.1
   Capital services          3.3    3.8    3.2    5.7    3.2    1.4    2.1

Analytic ratio
  Capital services per
    hour of all persons      2.5    2.2    1.8    3.7    3.1    1.6   -0.2


1.  Excludes government enterprises.
2.  Output per combined units of 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, 1987-2014

In percent



                            1987-  1987-  1990-  1995-  2000-  2007-  2013-
                            2014   1990   1995   2000   2007   2014   2014

Private nonfarm business1

Output per hour
of all persons               2.1    1.6    1.6    2.9    2.6    1.4    0.8

Contribution of
capital intensity2           0.8    0.7    0.7    1.2    1.0    0.6    0.0

Contribution of
labor composition3           0.3    0.4    0.4    0.2    0.2    0.3    0.1

Multifactor productivity4    0.9    0.5    0.5    1.4    1.4    0.5    0.8

  Contribution of R&D to
  multifactor productivity


Private business1

Output per hour
of all persons               2.1    1.7    1.6    3.0    2.7    1.4    0.6

Contribution of
capital intensity2           0.8    0.7    0.6    1.2    1.0    0.6   -0.1

Contribution of
labor composition3           0.3    0.4    0.5    0.2    0.2    0.3    0.1

Multifactor productivity4    1.0    0.6    0.5    1.6    1.4    0.5    0.6

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 and capital services.

Multifactor productivity plus contribution of capital intensity and
labor composition may not sum to output per hour due to independent
rounding.

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Last Modified Date: June 23, 2015
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