3rd QTR 04 productivity revised down from 1.9 to 1.8%, lowest in 2 yrs

[papau]

The government reported that worker productivity grew at a 1.8 percent annual rate in the third quarter, the slowest pace in nearly two years. Some saw the deceleration as a sign that employers have squeezed as many efficiencies out of their existing workers as they can, and may finally increase hiring to meet customer demand.

http://stats.bls.gov/news.release/prod2.nr0.htm

http://www.bls.gov/lpc/
PRODUCTIVITY AND COSTS
Third Quarter 2004, revised

The Bureau of Labor Statistics of the U.S. Department of Labor today
reported revised productivity data--as measured by output per hour of all
persons--for the third quarter of 2004. The seasonally adjusted annual rates
of productivity growth in the third quarter were:

2.4 percent in the business sector, and
1.8 percent in the nonfarm business sector.

In both sectors, changes in productivity are similar to the preliminary
estimates published November 4. Output and hours were revised upwards in both
sectors.

In manufacturing, revised productivity increases in the third quarter
were:

4.6 percent in manufacturing,
4.8 percent in durable goods manufacturing, and
5.4 percent in nondurable goods manufacturing.

Productivity in the manufacturing sector rose more rapidly than was
reported on Nov. 4. Both output and hours were revised up with the revisions
to output larger than those to hours. 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.


---------------------------------------------------------------------
Table A. Productivity and costs: Revised third-quarter 2004 measures
(Seasonally adjusted annual rates)
---------------------------------------------------------------------
Real
Hourly hourly Unit
Produc- compen- compen- labor
Sector tivity Output Hours sation sation costs
---------------------------------------------------------------------
Percent change from preceding quarter
Business 2.4 4.5 2.0 4.0 2.1 1.5
Nonfarm business 1.8 4.2 2.4 3.6 1.8 1.8
Manufacturing 4.6 4.5 -0.1 4.6 2.7 0.0
Durable 4.8 6.4 1.6 4.0 2.1 -0.8
Nondurable 5.4 2.4 -2.8 5.4 3.5 0.0
---------------------------------------------------------------------
Percent change from same quarter a year ago
Business 2.9 4.4 1.5 4.0 1.2 1.1
Nonfarm business 3.1 4.7 1.5 4.0 1.2 0.8
Manufacturing 4.7 5.9 1.2 3.2 0.4 -1.5
Durable 5.2 8.0 2.7 2.3 -0.5 -2.8
Nondurable 4.7 3.4 -1.3 4.5 1.7 -0.2
---------------------------------------------------------------------


Business

From the second quarter to the third quarter of 2004, business sector
productivity rose at an annual rate of 2.4 percent, as output increased 4.5
percent and hours of all persons engaged in the sector rose 2.0 percent
(table 1). The hours increase was the largest since a 2.4-percent rise in
the third quarter of 1999. Output per hour had increased 2.9 percent in the
second quarter.

Business sector hourly compensation increased 4.0 percent during the
third quarter of 2004, following a 5.2-percent increase in the second quarter
(as revised). Hourly compensation includes wages and salaries, supplements,
employer contributions to employee benefit plans, and taxes. Real hourly
compensation, which takes into account changes in consumer prices, rose 2.1
percent in the third quarter of 2004.

Unit labor costs increased 1.5 percent in the third quarter of 2004, less
than the 2.3-percent rise in the second quarter. The implicit price deflator
for the business sector, which reflects changes both in unit labor costs and
in unit nonlabor payments, rose at a 0.9 percent annual rate in the third
quarter of 2004.

Nonfarm business

Output per hour of all persons in the nonfarm business sector rose 1.8
percent during the third quarter of 2004, as output grew 4.2 percent and
hours of all persons increased 2.4 percent (table 2). Output had also
increased 4.2 percent in the second quarter, but because hours rose less, 0.3
percent, nonfarm productivity increased more, 3.9 percent. The 2.4-percent
increase in hours was the largest since the third quarter of 1999, when they
increased 2.6 percent.

Hourly compensation grew 3.6 percent in the third quarter of 2004, less
than the 5.9-percent increase in the previous quarter. When the rise in
consumer prices is taken into account, real hourly compensation rose 1.8
percent in the third quarter of 2004.

Unit labor costs rose 1.8 percent in the third quarter, similar to the
previous quarter, when they rose 1.9 percent. The implicit price deflator
for nonfarm business increased 1.6 percent in the third quarter of 2004.

Manufacturing

Productivity increased 4.6 percent in manufacturing in the third quarter
of 2004, as output increased 4.5 percent and hours of all persons edged down
0.1 percent (seasonally adjusted annual rates). In durable goods industries,
productivity increased 4.8 percent, reflecting increases of 6.4 percent in
output and 1.6 percent in hours. Productivity increased slightly more in the
nondurable goods industries, 5.4 percent, as output rose 2.4 percent and
hours fell 2.8 percent (tables 3, 4, and 5).

The hourly compensation of all manufacturing workers rose 4.6 percent
during the third quarter of 2004. In durable goods manufacturing, hourly
compensation increased 4.0 percent and in nondurable goods manufacturing it
grew 5.4 percent. When the increase in consumer prices is taken into
account, real hourly compensation for all manufacturing workers rose 2.7
percent in the third quarter.

Unit labor costs in manufacturing remained unchanged in the third
quarter after falling 1.4 percent in the previous quarter. Unit labor costs
declined 0.8 percent in durable goods manufacturing in the third quarter, and
were unchanged in nondurable goods manufacturing.

Nonfinancial Corporations

Third-quarter 2004 measures of productivity and costs also were released
for nonfinancial corporations (tables B and 6). Output per all-employee hour
grew at a 4.2 percent annual rate, faster than the 3.3 percent increase in
the previous quarter. Output increased 5.6 percent in the third quarter, and
hours of all employees rose 1.3 percent (seasonally adjusted annual rates).
The nonfinancial corporate sector includes all corporations doing business in
the United States, except those classified as depository institutions,
nondepository institutions, security and commodity brokers, insurance
carriers, regulated investment offices, small business investment offices,
and real estate investment trusts.


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Table B. Nonfinancial corporations: Third-quarter 2004
productivity and cost measures
(Seasonally adjusted annual rates)
----------------------------------------------------------------------------
Real
Hourly hourly Unit Implicit
Produc- compen- compen- labor Unit price
Period tivity Output Hours sation sation costs profits deflator
----------------------------------------------------------------------------
Percent change from preceding quarter
2003 III 4.2 5.6 1.3 4.0 2.1 -0.3 0.9 0.3
----------------------------------------------------------------------------
Percent change from same quarter a year ago
2003 III 3.1 4.8 1.7 4.0 1.2 0.8 13.5 1.6
----------------------------------------------------------------------------


Hourly compensation in nonfinancial corporations increased 4.0 percent
in the third quarter, down from the second quarter increase of 5.5 percent.
When the rise in consumer prices is taken into account, real hourly
compensation increased 2.1 percent in the third quarter.

Unit labor costs for the sector declined 0.3 percent in third quarter
2004. Unit nonlabor costs rose 1.4 percent, while unit profits rose at a 0.9
percent annual rate in the third quarter. As a result of these movements,
the implicit price deflator for the output of nonfinancial corporations--
which reflects a weighted average of these three measures--increased 0.3
percent.

Revised Measures

Current and previous measures for the second and third quarters of 2004
for the business, nonfarm business, and manufacturing sectors are compared in
table C. In the third quarter, business sector productivity growth was
revised up 0.1 percentage point when output was revised up more than hours.
Conversely, productivity was revised down in the nonfarm business sector, as
output was revised up less than hours. Unit labor costs in the business
sector showed the same 1.5 percent increase in the third quarter as reported
previously, while unit labor costs in nonfarm business rose slightly faster
than reported on Nov. 4. In manufacturing, an upward revision to output
raised the third-quarter gain in productivity to 4.6 percent. Because the
revision to productivity was largely offset by an upward revision to hourly
compensation, unit labor costs were revised only slightly, and now show no
change from the previous quarter.


---------------------------------------------------------------------
Table C. Previous and revised productivity and related measures:
Quarterly percent change at seasonally adjusted annual rate
---------------------------------------------------------------------
Real
Hourly hourly Unit
Produc- compen- compen- labor
Sector tivity Output Hours sation sation costs
---------------------------------------------------------------------
Third quarter 2004
Business:
Previous 2.3 4.2 1.9 3.8 2.0 1.5
Revised 2.4 4.5 2.0 4.0 2.1 1.5
Nonfarm business:
Previous 1.9 4.1 2.1 3.6 1.7 1.6
Revised 1.8 4.2 2.4 3.6 1.8 1.8
Manufacturing:
Previous 4.3 4.0 -0.3 4.4 2.5 0.1
Revised 4.6 4.5 -0.1 4.6 2.7 0.0
---------------------------------------------------------------------
Second quarter 2004
Business:
Previous 2.9 3.9 1.0 4.3 -0.4 1.4
Revised 2.9 3.9 1.0 5.2 0.5 2.3
Nonfarm business:
Previous 3.9 4.2 0.3 4.9 0.2 1.0
Revised 3.9 4.2 0.3 5.9 1.1 1.9
Manufacturing:
Previous 8.3 6.7 -1.4 3.8 -0.9 -4.2
Revised 8.3 6.7 -1.4 6.8 2.0 -1.4
---------------------------------------------------------------------


The second-quarter 2004 measures of hourly compensation, real hourly
compensation, and unit labor costs were revised to reflect new information on
compensation. In the business and nonfarm business sectors, hourly
compensation and unit labor costs show larger increases than previously
reported; real hourly compensation rose instead of fell in the business
sector. In manufacturing, hourly compensation increased sharply in the
second quarter, and real hourly compensation rose rather than fell, after
revision. Manufacturing unit labor costs decreased less during the second
quarter of 2004 than previously reported.

Revised measures: Nonfinancial corporations

Measures for the nonfinancial corporate sector also were revised to
reflect updated information on output and employee compensation during the
second quarter of 2004 (table D). With hours unchanged, productivity was
revised upwards along with output. An upward revision to compensation
implied larger increases in hourly compensation and real hourly compensation.
Because the revision to compensation was greater than to output, unit labor
costs increased more in the second quarter than previously reported.


-----------------------------------------------------------------------------
Table D. Nonfinancial corporations: Previous and revised
productivity and cost measures
Quarterly percent changes at seasonally adjusted annual rates
-----------------------------------------------------------------------------
Real
Hourly hourly Unit Implicit
Produc- compen- compen- labor Unit price
tivity Output Hours sation sation costs profits deflator
-----------------------------------------------------------------------------
Second quarter 2004
Previous 2.7 3.7 0.9 4.7 0.0 1.9 21.7 3.8
Revised 3.3 4.2 0.9 5.5 0.7 2.2 21.1 3.8
-----------------------------------------------------------------------------


Upcoming change

Early in 2005, BLS will improve the way it uses data for farm workers,
the nonfarm self employed, and nonfarm unpaid family workers in the
productivity program by accounting for the effects of multiple jobholding.



NEXT RELEASE DATE

The next release of Productivity and Costs is scheduled for 8:30 AM EST,
Thursday, February 5, 2005. Preliminary fourth-quarter and annual 2004
measures will be released at that time. Quarterly measures for the
manufacturing sector will reflect the annual revision to the index of
industrial production.

[rockymountaindem]

1. So much for the argument that

high productivity is responsible for low job growth.

[gnofg]

2. stop it

Hey the economy is booming. Didn't you know. * told us so. Everything is up. I actually spoke to one of the big retailers in the country(corp headquarters) and sales suck.

[stevebreeze]

3. my favorite productivity lie is

how workers who are more productive can be paid more without increasing inflation....funny stuff! Workers earn less now then 25 years ago despite an over 50% increase in productivity in that time.

[andino]

4. Isn't most of that productivity increase

due to technology increases?

Also, my favorite lie is that the Christmas season will pull us out of this funk... HA!