U.S. Manufacturing Productivity Rises in Q3

Output increased nearly 5 percent during Q3, and overall productivity is up 1 percent over the past 12 months.

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Nonfarm business sector labor productivity increased at a 2.3 percent annual rate during the third quarter of 2014, the U.S. Bureau of Labor Statistics reported Wednesday, as output increased 4.9 percent and hours worked increased 2.5 percent. (All quarterly percent changes in this release are seasonally adjusted annual rates.) From the third quarter of 2013 to the third quarter of 2014, productivity rose 1.0 percent as output and hours worked increased 3.1 percent and 2.1 percent, respectively.

Labor productivity, or output per hour, is calculated by dividing an index of real output by an index of hours worked of all persons, including employees, proprietors, and unpaid family workers. Measures released today are based on more recent source data than were available for the preliminary report.

Unit labor costs in the nonfarm business sector fell 1.0 percent in the third quarter of 2014, as a 1.3 percent increase in hourly compensation was smaller than the 2.3 percent gain in productivity. Unit labor costs increased 1.2 percent over the last four quarters.

BLS calculates unit labor costs as the ratio of hourly compensation to labor productivity; increases in hourly compensation tend to increase unit labor costs and increases in output per hour tend to reduce them.

Manufacturing sector productivity increased 2.9 percent in the third quarter of 2014, as output increased 4.2 percent and hours worked increased 1.3 percent. Productivity increased 3.2 percent in the durable goods sector and increased 3.5 percent in the nondurable goods sector. Over the last four quarters, manufacturing productivity increased 2.7 percent, as output increased 4.4 percent and hours increased 1.6 percent. Unit labor costs in manufacturing fell 1.3 percent in the third quarter of 2014 and decreased 0.5 percent from the same quarter a year ago.

Preliminary third-quarter 2014 measures were announced Wednesday for the nonfinancial corporate sector. Productivity increased 1.1 percent as output and hours rose 4.0 percent and 2.9 percent, respectively.

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