Qtr 3 '05 Productivity: Durable goods manufacturing increases 7.5%, hours unchanged
PRODUCTIVITY AND COSTS
Third Quarter 2005, preliminary
The Bureau of Labor Statistics of the U.S. Department of Labor today
reported preliminary productivity data--as measured by output per hour of all
persons--for the third quarter of 2005. The preliminary seasonally-adjusted
annual rates of productivity growth in the third quarter were:
4.8 percent in the business sector and
4.1 percent in the nonfarm business sector.
Productivity increased 4.8 percent in the business sector, as output grew 4.3
percent and hours declined 0.4 percent. The 4.1-percent rise in nonfarm
business productivity occurred as output rose 4.2 percent and hours rose 0.1
percent (table A).
The effects of Hurricanes Katrina and Rita, which struck the Gulf Coast
during the third quarter, could not be separately identified in the
productivity and costs measures. The measures reported in this news release
reflect both these effects and ongoing trends in ouput, hours, and
compensation.
In manufacturing, productivity increases in the third quarter were:
4.5 percent in manufacturing,
7.5 percent in durable goods manufacturing, and
1.7 percent in nondurable goods manufacturing.
The third-quarter increase in manufacturing productivity followed a 3.6-
percent increase in the second quarter of 2005. Output and hours in
manufacturing, which includes about 13 percent of U.S. business sector
employment, tend to vary more from quarter to quarter than data for the
aggregate business and nonfarm business sectors. Third-quarter measures are
summarized in table A and appear in detail in tables 1 through 5.
The data sources and methods used in the preparation of the
manufacturing series differ from those used in preparing the business and
nonfarm business series, and these measures are not directly comparable.
Output measures for business and nonfarm business are based on measures of
gross domestic product prepared by the Bureau of Economic Analysis of the
U.S. Department of Commerce. Quarterly output measures for manufacturing
reflect indexes of industrial production independently prepared by the Board
of Governors of the Federal Reserve System. See Technical Notes for further
information on data sources.
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Table A. Productivity and costs: Preliminary third-quarter 2005
measures
(Seasonally adjusted annual rates)
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Real
Hourly hourly Unit
Produc- compen- compen- labor
Sector tivity Output Hours sation sation costs
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Percent change from preceding quarter
Business 4.8 4.3 -0.4 4.2 -0.9 -0.6
Nonfarm business 4.1 4.2 0.1 3.6 -1.4 -0.5
Manufacturing 4.5 3.1 -1.4 2.9 -2.1 -1.6
Durable 7.5 7.5 0.0 2.4 -2.6 -4.7
Nondurable 1.7 -2.1 -3.7 3.4 -1.7 1.7
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Percent change from same quarter a year ago
Business 2.9 4.1 1.1 5.8 1.9 2.8
Nonfarm business 3.0 4.2 1.2 5.8 1.9 2.7
Manufacturing 4.7 3.1 -1.5 7.2 3.3 2.5
Durable 6.0 5.2 -0.8 6.8 2.9 0.7
Nondurable 3.3 0.5 -2.7 7.8 3.9 4.4
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Business
From the second quarter to the third quarter of 2005, productivity in
the business sector grew at a 4.8 percent seasonally adjusted annual rate.
Output increased 4.3 percent, while hours of all persons engaged in the
sector declined 0.4 percent. The third-quarter productivity increase was
much faster than the 0.8-percent gain recorded in the second quarter of 2005
(as revised), which reflected a 4.0-percent rise in output and a 3.1-percent
rise in hours. (tables B and 1).
Hourly compensation in the business sector increased at an annual rate
of 4.2 percent during the third quarter of 2005, faster than the 3.0-percent
rise one quarter earlier ( as revised). This measure includes wages and
salaries, supplements, employer contributions to employee benefit plans, and
taxes. Real hourly compensation, which takes into account changes in
consumer prices, fell by 0.9 percent in the third quarter of 2005 after
falling by 1.1 percent in the second quarter. It had increased 2.3 percent
in the first quarter of the year.
Unit labor costs, which reflect changes in both hourly compensation and
productivity, declined 0.6 percent during the third quarter. By contrast,
this measure had increased 2.2 percent in the second quarter. The implicit
price deflator for the business sector increased 3.0 percent during the third
quarter of 2005, following a 2.6 percent increase in the previous quarter.
Nonfarm business
Productivity in the nonfarm business sector grew 4.1 percent during the
third quarter of 2005 as output grew 4.2 percent. Hours of all persons in
the nonfarm business sector edged up 0.1 percent, reflecting a 0.4-percent
gain in employment and a 0.4-percent decline in average weekly hours at work.
In the previous quarter, nonfarm business productivity increased 2.1 percent,
as output grew 4.4 percent and hours worked increased by 2.2 percent (table
2).
Hourly compensation increased at a 3.6 percent annual rate in the third
quarter of 2005. When the rise in consumer prices is taken into account, real
hourly compensation fell 1.4 percent during the July-September period.
During the second quarter of 2005, real hourly compensation had declined 0.1
percent.
Unit labor costs in the nonfarm business sector fell 0.5 percent during
the third quarter of 2005, after rising 1.8 percent in the second quarter.
The implicit price deflator for nonfarm business output rose 3.3 percent in
the third quarter of 2005.
Manufacturing
Productivity increased 4.5 percent in manufacturing in the third quarter
of 2005 as output grew 3.1 percent and hours of all persons fell 1.4 percent
(seasonally adjusted annual rates). In durable goods industries,
productivity and output both grew 7.5 percent in the third quarter while
hours of all persons were unchanged. Productivity increased 1.7 percent in
nondurable goods, where output fell 2.1 percent but hours fell faster, 3.7
percent (tables 3, 4, and 5).
The hourly compensation of manufacturing workers increased an average of
2.9 percent during the third quarter of 2005, reflecting increases of 2.4
percent in durable goods and 3.4 percent in nondurable goods. When the
increase in consumer prices is taken into account, real hourly compensation
in total manufacturing fell 2.1 percent in the third quarter. Real hourly
compensation had grown in the first two quarters of 2005; 3.6 percent in the
second quarter (as revised) and 4.6 percent in the first quarter.
Unit labor costs in manufacturing fell 1.6 percent in the third quarter
of 2005, after rising in each of the previous four quarters. In the durable
goods sector, unit labor costs fell 4.7 percent in the third quarter after
increasing 4.0 percent one quarter earlier. In the nondurable goods sector,
unit labor costs rose 1.7 percent in the third quarter and 4.0 percent in the
second quarter of 2005.
Revised Measures
Revised and previous measures for the second quarter of 2005 for the
business, nonfarm business, and manufacturing sectors are compared in table
B. Hours data for the second quarter now reflect more current data on the
ratio of hours worked to hours paid in private nonfarm businesses.
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Table B. Previous and revised productivity and related measures
Quarterly percent change at seasonally adjusted annual rate
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Real
Hourly hourly Unit
Produc- compen- compen- labor
Sector tivity Output Hours sation sation costs
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Second quarter 2005
Business:
Previous........ 0.7 4.0 3.2 3.3 -0.8 2.6
Revised......... 0.8 4.0 3.1 3.0 -1.1 2.2
Nonfarm business:
Previous........ 1.8 4.1 2.2 4.4 0.2 2.5
Revised......... 2.1 4.4 2.2 4.0 -0.1 1.8
Manufacturing:
Previous........ 3.6 0.8 -2.7 8.4 4.1 4.7
Revised......... 3.6 0.9 -2.6 7.9 3.6 4.2
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In the business sector, productivity, output, and hours grew about the
same as reported on Sept. 7, based on information then available. In the
nonfarm sector, growth in productivity and output was revised up while the
increase in hours remained the same. Productivity was unchanged in the
manufacturing sector, reflecting offsetting small upward revisions to output
and hours. In all three sectors, hourly compensation and unit labor costs
were revised down.
Revised measures: Nonfinancial Corporations
Productivity and cost measures for nonfinancial corporations for the
second quarter of 2005 also were revised to incorporate more recent
information than was available on Sept. 7.
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Table C. Nonfinancial corporations: Previous and revised productivity and
cost measures
Quarterly percent changes at seasonally adjusted annual rates
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Real
Hourly hourly Unit Implicit
Produc- compen- compen- labor Unit price
tivity Output Hours sation sation costs profits deflator
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Second quarter 2005
Previous 6.8 9.5 2.6 4.0 -0.1 -2.6 43.2 1.3
Revised 6.3 9.0 2.6 3.7 -0.5 -2.4 41.7 1.4
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Productivity grew at an annual rate of 6.3 percent in second-quarter
2005, compared with the increase of 6.8 percent reported previously. This
was the result of a downward revision in output growth, from 9.5 percent to
9.0 percent, as hours growth was unchanged. Unit labor costs fell more
slowly than reported previously, as hourly compensation was revised down less
than productivity. Unit profits increased slightly less than reported on
Sept. 7. (tables C and 6).
Next release date
The next release of Productivity and Costs is scheduled for 8:30 AM EST,
Tuesday, Dec. 6, 2005. It will present third-quarter measures for
nonfinancial corporations and revised third-quarter measures for business,
nonfarm business, and manufacturing.
The index numbers and rates of change reported by BLS for productivity and
costs in its news release and on its Internet site are rounded to one decimal
place, based upon unrounded data using many decimal places. This rounding
protocol has been practiced in order to facilitate ease of use and
interpretation of the published data. This has meant, however, that if data
users calculated rates of change using the published rounded index figures,
their results could differ from the published rates of change, simply due to
differences in rounding.
In order to make the data directly used in the calculations more readily
available to the public and to ensure greater transparency of its calculating
methods, BLS, beginning with the December 6, 2005 publication of the
quarterly "Productivity and Costs" news release, will modify its productivity
program practices. It will post on its web site productivity index numbers
rounded to three decimal places, and, in addition, will calculate all
published rates of change from those indexes. The change in calculation
method may cause published productivity growth rates to change slightly--
likely by no more than a tenth--from the rates that would have been
calculated using the current method. The convention of publishing in the
news release index values rounded to one decimal place will continue.
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