Productivity and Costs, Third Quarter 2008 Preliminary


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                                PRODUCTIVITY AND COSTS
                           Third Quarter 2008, 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 2008.  The preliminary seasonally-adjusted 
annual rates of productivity growth in the third quarter were:

        1.3 percent in the business sector and
        1.1 percent in the nonfarm business sector.
        
In both sectors, productivity gains were smaller than in the first two 
quarters of 2008, and were the result of hours at work falling faster than 
output. (See table A)
.
        In manufacturing, productivity changes in the third quarter were:
        
        -1.0 percent in manufacturing,
         3.3 percent in durable goods manufacturing, and
        -7.3 percent in nondurable goods manufacturing.
        
        
        Manufacturing productivity fell for the second consecutive quarter; the 
third-quarter decline was concentrated in the nondurable goods sector, 
whereas the second-quarter decrease was due to a drop in durable goods 
productivity.  Output and hours in manufacturing, which includes about 12 
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 2008 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                  1.3      -1.5     -2.8        4.7     -1.9      3.4
Nonfarm business          1.1      -1.7     -2.7        4.7     -1.9      3.6
Manufacturing            -1.0      -5.8     -4.9        5.0     -1.6      6.1
  Durable                 3.3      -4.7     -7.7        6.0     -0.7      2.6
  Nondurable             -7.3      -7.0      0.4        3.7     -2.9     11.8
------------------------------------------------------------------------------  
                        Percent change from same quarter a year ago
                
Business                  1.8       0.3     -1.5        4.1     -1.1      2.3
Nonfarm business          2.0       0.3     -1.7        4.3     -0.9      2.3
Manufacturing             1.1      -2.6     -3.7        5.1     -0.2      3.9
  Durable                 1.9      -2.6     -4.4        5.1     -0.2      3.1
  Nondurable             -0.2      -2.7     -2.5        5.3      0.0      5.5
------------------------------------------------------------------------------

  
Business

        Business sector output per hour grew 1.3 percent in the 
third quarter of 2008 as output decreased 1.5 percent and hours 
worked by all persons--employees, proprietors, and unpaid family 
workers--fell 2.8 percent (seasonally adjusted annual rates).  
The decline in output was the largest since the third quarter of 
2001, when output fell 3.1 percent.  Hours had not dropped as 
much in one quarter since the first quarter of 2002, (-3.1 
percent).  From the third quarter of 2007 to the third quarter of 
2008, productivity increased 1.8 percent; output edged up 0.3 
percent and hours decreased 1.5 percent in the business sector.

        Hourly compensation in the business sector increased at an 
annual rate of 4.7 percent during the third quarter of 2008. 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, decreased by 1.9 percent in the third quarter of 2008.

        Changes in unit labor costs approximate the change in hourly 
compensation less the change in productivity.  In the third 
quarter of 2008, unit labor costs rose at a 3.4 percent annual 
rate.  The implicit price deflator for business sector output, 
which reflects changes in both unit labor cost and unit nonlabor 
payments, rose 4.5 percent in the third quarter of 2008.


Nonfarm business

        Productivity increased 1.1 percent in the nonfarm business 
sector in the third quarter of 2008; output and hours fell 1.7 
percent and 2.7 percent, respectively.  The decline in output was 
the largest since third-quarter 2001 (-2.9 percent), and the drop 
in hours was the largest since the first quarter of 2002 (-3.4 
percent).  Over the last four quarters, nonfarm business output 
per hour increased 2.0 percent; output rose 0.3 percent, and 
hours fell 1.7 percent.  From 2000 to 2007, nonfarm productivity 
increased at a 2.5 percent average annual rate, as output grew 
2.5 percent and hours edged up 0.1 percent on average.

        Nonfarm hourly compensation increased at a 4.7 percent 
annual rate in the third quarter of 2008.  Real hourly 
compensation decreased 1.9 percent in the third quarter, as 
consumer prices increased 6.7 percent (seasonally adjusted annual 
rates). 

        Unit labor costs in the nonfarm business sector increased 
3.6 percent during the third quarter of 2008 and 2.3 percent over 
the last four quarters.  The implicit price deflator for nonfarm 
business output increased 5.0 percent in the third quarter of 
2008.

  
Manufacturing

        Manufacturing output per hour decreased 1.0 percent in the 
third quarter of 2008; output fell 5.8 percent and hours of all 
persons declined 4.9 percent (seasonally adjusted annual rates).  
Productivity increased 3.3 percent in durable goods industries as 
the 4.7 percent decline in output was outpaced by a 7.7 percent 
decline in hours.  By contrast, productivity declined 7.3 percent 
in the nondurable goods sector in the third quarter as output 
fell 7.0 percent while hours increased 0.4 percent.  Total 
manufacturing productivity grew 1.1 percent from the third 
quarter of 2007 to the third quarter of 2008, compared to a 3.7 
percent average annual growth rate from 2000 to 2007.

        Hourly compensation of manufacturing workers increased 5.0 
percent during the third quarter of 2008, reflecting a 6.0 
percent gain in the durable goods subsector and a 3.7 percent 
gain in nondurable goods industries.  Real hourly compensation 
for total manufacturing decreased 1.6 percent in the third 
quarter.

        Unit labor costs in manufacturing rose 6.1 percent in the 
third quarter of 2008, reflecting a 2.6 percent increase in 
durable goods industries and an 11.8 percent jump in nondurable 
goods industries.  Total manufacturing sector unit labor costs 
have increased 3.9 percent since the third quarter of 2007.

  
Revised Measures

        Revised and previous measures for the second quarter of 
2008, for the business, nonfarm business, and manufacturing 
sectors are compared in table B.  Hours declined at the same 
rates reported September 4 in all sectors.  In the business and 
nonfarm business sectors output was revised downward, resulting 
in a corresponding downward revision to productivity.  In the 
manufacturing sector productivity change, while negative, was 
revised up due to a small upward revision to output.

                                                
------------------------------------------------------------------------------
Table B. 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
-------------------------------------------------------------------------------
                                Second quarter 2008
                                
Business:                                               
  Previous                4.3      3.2     -1.0       4.0       -1.0     -0.4
  Revised                 3.7      2.6     -1.0       3.8       -1.2      0.1
Nonfarm business:                                               
  Previous                4.3      3.4     -0.8       3.7       -1.3     -0.5
  Revised                 3.6      2.8     -0.8       3.5       -1.4     -0.1
Manufacturing:                                          
  Previous               -2.2     -3.7     -1.5       3.9       -1.1      6.2
  Revised                -1.9     -3.4     -1.5       3.8       -1.2      5.8
-------------------------------------------------------------------------------


        In all three sectors, hourly compensation was revised down 
slightly.  In the business and nonfarm business sectors, unit 
labor costs were revised upwards--this was the result of 
productivity being revised down more than hourly compensation.  
In manufacturing both the upward revision to productivity and the 
downward revision to hourly compensation contributed to a 
downward revision to unit labor costs. 


Revised measures: Nonfinancial Corporations 

        Productivity and cost measures for nonfinancial corporations 
for the second quarter of 2008 also were revised.  Revised 
productivity growth was 8.6 percent due to an upward revision in 
output; hours were virtually unchanged (table C).  Productivity 
grew 3.0 percent in the sector when measured over the four 
quarters ending with the second quarter (table 6).  

                                                                
------------------------------------------------------------------------------
Table C.  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 2008
                                
Previous  5.6      3.8    -1.7     3.7      -1.2    -1.8    -24.7       -3.6
Revised   8.6      6.9    -1.6     3.7      -1.3    -4.6     -8.4       -3.9
------------------------------------------------------------------------------


        Unit labor costs were revised down from -1.8 percent to -4.6 
percent--the result of productivity being revised up while hourly 
compensation remained unrevised.



        
                             Next release date
                             
                             
        The next release of Productivity and Costs is scheduled for 
8:30 AM EST, Wednesday, December 3, 2008.  It will present third-
quarter measures for nonfinancial corporations and revised third-
quarter measures for business, nonfarm business, and 
manufacturing.
        

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Last Modified Date: November 06, 2008