Unit labor costs in nonfarm businesses rose 1.0 percent in the first quarter of 2011, as a 2.6 percent increase in hourly compensation outpaced the 1.6 percent gain in productivity. Unit labor costs rose 1.2 percent from the same quarter a year ago. In the first quarter of 2011, the consumer price series increased at a 5.3 percent annual rate, resulting in a decline of 2.5 percent in real hourly compensation.
BLS defines 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. Real hourly compensation is equal to hourly compensation divided by the consumer price series.
Manufacturing sector productivity grew 6.3 percent in the first quarter of 2011, as output and hours worked increased 9.7 percent and 3.3 percent, respectively. Over the last four quarters, manufacturing productivity increased 4.7 percent. Unit labor costs in manufacturing declined 3.5 percent in the first quarter of 2011 and 1.4 percent over the last four quarters.
Productivity increased 9.8 percent in the durable goods sector and 4.5 percent in the nondurable goods sector in the first quarter of 2011. In durable goods industries, a 16.4 percent jump in output outweighed a 6.1 percent increase in hours worked; this gain in output is the largest in the series. Nondurable goods production rose 3.3 percent while hours fell 1.2 percent.
The data sources and methods used in the preparation of the manufacturing output series differ from those used in preparing the business and nonfarm business output series, and these measures are not directly comparable.
Fourth quarter and annual 2010 measures of productivity and costs were announced for the nonfinancial corporate sector. Output per employee hour rose 2.6 percent for the fourth quarter of 2010 as output and hours rose 4.5 percent and 1.8 percent, respectively. Annual average productivity grew 5.7 percent in 2010.
Revised measures
Revised measures of real hourly compensation for all sectors for 2006 onward reflect revisions in the consumer price series based on new and revised data from the BLS Office of Prices and Living Conditions. Output data for the manufacturing sectors reflects historically revised indexes of industrial production published by the Board of Governors of the Federal Reserve System on March 25. Accordingly, manufacturing output, productivity and unit labor costs were revised back to 1987.
In the fourth quarter of 2010, nonfarm business productivity growth was revised up to 2.9 percent due to a small upward revision to output. After revision, unit labor costs fell 1.0 percent. In the manufacturing sector, fourth-quarter productivity growth was revised down to 5.1 percent.
For the year 2010, nonfarm business sector productivity grew 3.9 percent and unit labor costs fell 1.5 percent, the same as the preliminary estimates published March 3. In the manufacturing sector, productivity grew 5.9 percent and unit labor costs fell 3.7 percent, as revised.
