BLS Handbook of Methods

In This Chapter

Chapter 10.
Productivity Measures: Business Sector and Major Subsectors

Description of Measures

BLS publishes three sets of productivity measures for the major sectors and subsectors of the U.S. economy, each using a distinct methodology. One measure includes labor productivity for the major sectors of business, nonfarm business, and nonfinancial corporations and for the subsectors of total, durable, and nondurable manufacturing. The second set includes multifactor productivity for major sectors; and the third measures multifactor productivity for total manufacturing and 20 2-digit Standard Industrial Classification manufacturing industries. Each set of measures involves a comparison of output and input measures.

The traditional measure of labor productivity — output per hour — was first published in 1959, and represents the culmination of a long series of developments in productivity measurement in the Bureau.1 Output, measured net of price change and inter-industry transactions2, is compared to labor input, measured as hours at work in the corresponding sector. These measures are prepared for the business sector, the nonfarm business sector, nonfinancial corporations, and manufacturing, along with subsectors of durable and nondurable goods manufacturing. These measures are available quarterly and are updated and revised eight times a year.

The second set of measures covers multifactor productivity for major U.S. sectors.3 In these measures, output is again measured net of price changes and inter-industry transactions, but the input measure is an aggregate of hours at work and capital service flows. These measures have been developed in recognition of the role capital growth plays in output growth. They are updated annually.

Comparisons of output with a broader set of inputs constitute the third set of measures.4 Because the scope of industries within manufacturing is narrower than that of the nonfarm business sector, output in manufacturing industries includes shipments to both other producers and final consumers.5 Consistent with such an output concept is an input measure which includes intermediate inputs. Accordingly, input includes labor and capital, and also energy, nonenergy materials, and purchased business services. These measures are available for a comprehensive set of 20 manufacturing industries (corresponding to the 2-digit Standard Industrial Classification (SIC) level) as well as for total manufacturing. As the focus narrows to more specific industries, intermediate inputs take on an increasingly important role in productivity measurement and analysis. This set of measures consists of annual data and is updated approximately every 2 years.

Footnotes
1 Trends in Output per Man-Hour in the Private Economy, 1909-58, Bulletin 1249 (Bureau of Labor Statistics, 1959).
2 The output measures represent deliveries of final goods and services by the sector to domestic households, investment, government and nonprofit institutions, and net exports to other countries. These measures are gross in the sense that neither capital consumption allowances nor purchases of capital goods are deducted, but they are net in the sense that inter-industry transactions in intermediate materials and services are excluded from output. These transactions are excluded to avoid double counting. For example, the output of the steel industry is excluded to the extent that it is incorporated in final products such as automobiles.
3 Trends in Multifactor Productivity, 1948-81, Bulletin 2178 (Bureau of Labor Statistics, 1983).
4 These measures were first introduced in William Gullickson and Michael J. Harper, "Multifactor Productivity in 20 U.S. Manufacturing Industries, 1949-83," Monthly Labor Review, October 1987, pp. 18-28. A similar measure for utility services industries is in John L. Glaser, "Multifactor Productivity in the Utility Services Industries," Monthly Labor Review, May 1993, pp. 34-49.
5 In the more aggregate sectors, such as business and nonfarm business, the delivery of goods to final users closely corresponds to value added or gross product originating (GPO). In less aggregate economic sectors, such as manufacturing, where inter-industry transaction represent a smaller proportion of goods and services produced, deliveries include output which is not part of final demand and more closely approximates a gross output measure.

Next: Data Sources and Estimating Procedures

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