TECHNICAL NOTES

Labor Hours: Hours data for the labor productivity and cost measures include 
hours for all persons working in the sector—wage and salary workers, the 
self-employed and unpaid family workers.  The primary source of hours and 
employment data is the BLS Current Employment Statistics (CES) program, which 
provides monthly survey data on the number of jobs held by wage and salary 
workers in nonfarm establishments.  The CES also provides average weekly paid 
hours of production and nonsupervisory workers in these establishments.  
Weekly paid hours are adjusted to hours at work using data from the National 
Compensation Survey (NCS).  The BLS Hours at Work survey, conducted for this 
purpose, was used for earlier years.  The Office of Productivity and 
Technology estimates average weekly hours at work for nonproduction and 
supervisory workers using information from the Current Population Survey 
(CPS), the CES, and the NCS.
      Data from the CPS are used for farm labor, nonfarm proprietors, and 
nonfarm unpaid family workers.  Estimates of labor input for government 
enterprises are derived from the CPS, the CES, and the National Income and 
Product Accounts (NIPA) prepared by the Bureau of Economic Analysis (BEA) of 
the Department of Commerce.
      The CES measures jobs, counting a person who is employed by two or more 
establishments at each place of employment. In contrast, the CPS features 
measures of employment that count each person only once and classify each 
person according to his or her primary job; hours worked at all jobs by that 
person accrue to his or her primary job.  However, the CPS also collects more 
detailed information on employment and hours worked at primary jobs and all 
other jobs, separately.  The BLS productivity measures use the more detailed 
information on employment and hours to assign all hours worked to the correct 
industrial sector and avoid duplicating hours data from the CES.

Output: Business sector output is a chain-type, current-weighted index 
constructed after excluding from gross domestic product (GDP) the following 
outputs: general government, nonprofit institutions, and private households 
(including owner-occupied housing). Corresponding exclusions also are made in 
labor inputs. Business output accounted for about 78 percent of the value of 
GDP in 2000. Nonfarm business, which excludes farming, accounted for about 77 
percent of GDP in 2000.
      Annual indexes for manufacturing and its durable and nondurable goods 
components are constructed by deflating current-dollar industry value of 
production data from the U.S. Bureau of the Census with deflators from the 
BLS.  These deflators are based on data from the BLS producer price program 
and other sources.  The industry shipments are aggregated using annual 
weights, and intrasector transactions are removed.  Quarterly manufacturing 
output measures are based on the index of industrial production prepared 
monthly by the Board of Governors of the Federal Reserve System, adjusted to 
be consistent with annual indexes of manufacturing sector output prepared by 
BLS.  Durables include the following 3-digit NAICS industries: wood product 
manufacturing; nonmetallic mineral product manufacturing; primary metal 
manufacturing; fabricated metal product manufacturing; machinery 
manufacturing; computer and electronic product manufacturing; electrical 
equipment and appliance manufacturing; transportation equipment 
manufacturing; furniture and related product manufacturing; and miscellaneous 
manufacturing. Nondurables include: food manufacturing; beverage and tobacco 
product manufacturing; textile mills; textile product mills; apparel 
manufacturing; leather and allied product manufacturing; paper manufacturing; 
printing and related support activities; petroleum and coal products 
manufacturing; chemical manufacturing; and plastics and rubber products 
manufacturing.
      Nonfinancial corporate output is a chain-type, current-weighted index 
calculated on the basis of the costs incurred and the incomes earned from 
production.  The output measure excludes the following outputs from GDP: 
general government; nonprofit institutions; private households; 
unincorporated business; and those corporations classified as offices of bank 
holding companies, offices of other holding companies, or offices in the 
finance and insurance sector. Nonfinancial corporations accounted for about 
54 percent of the value of GDP in 2000.
      
Productivity: These productivity measures describe the relationship between 
real output and the labor time involved in its production. They show the 
changes from period to period in the amount of goods and services produced 
per hour. Although these measures relate output to hours at work of all 
persons engaged in a sector, they do not measure the specific contribution of 
labor, capital, or any other factor of production. Rather, they reflect the 
joint effects of many influences, including changes in technology; capital 
investment; level of output; utilization of capacity, energy, and materials; 
the organization of production; managerial skill; and the characteristics and 
effort of the work force.

Labor Compensation: Estimates of labor compensation by major sector, required 
for measures of hourly compensation and unit labor costs, are based primarily 
on employee compensation data from the NIPA, prepared by the BEA.  The 
compensation of employees in general government, nonprofit institutions and 
private households are subtracted from compensation of domestic employees to 
derive employee compensation for the business sector. The labor compensation 
of proprietors cannot be explicitly identified and must be estimated.  This 
is done by assuming that proprietors have the same hourly compensation as 
employees in the same sector.  The quarterly labor productivity and cost 
measures do not contain estimates of compensation for unpaid family workers.  
        
Unit Labor Costs:  The measures of unit labor costs in this release describe 
the relationship between compensation per hour and productivity, or real 
output per hour, and can be used as an indicator of inflationary pressure on 
producers.  Increases in hourly compensation increase unit labor costs; labor 
productivity increases offset compensation increases and lower unit labor 
costs. 

Presentation of the data:  The quarterly data in this release are presented 
in three ways; as index number series where 1992=100, as percent changes from 
the corresponding quarter of the previous year, and as percent changes from 
the previous quarter presented at a compound annual rate.  Annual data are 
presented both as index number series and percent changes from the previous 
year.  
	The index numbers and rates of change reported in the productivity and 
costs news release are rounded to one decimal place.  All percent changes in 
this release and on the BLS web site are calculated using index numbers to 
three decimal places.  These index numbers are available at the BLS web site, 
http://www.bls.gov/data/home.htm, or by contacting the BLS Division of Major 
Sector Productivity.  (Telephone 202-691-5606 or email DPRWEB@BLS.GOV)
        
        Information in this release will be made available to sensory-impaired 
individuals upon request. Voice phone: 202-691-5606; Federal Relay Service 
number: 1-800-877-8339.