Unit labor costs in nonfarm businesses rose 1.1 percent in the second quarter of 2010, as the 1.8 percent decline in productivity was partially offset by a 0.7 percent decline in hourly compensation. Unit labor costs decreased 2.8 percent over the last four quarters, as output per hour increased faster than 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.
Manufacturing sector productivity grew 4.1 percent in the second quarter of 2010, as output rose 8.4 percent and hours worked increased 4.1 percent. Productivity performance differed between the two manufacturing subsectors. In durable manufacturing, output per hour increased 9.9 percent as output grew 13.6 percent and hours rose 3.4 percent. In nondurable goods industries, productivity fell 2.4 percent as output grew 2.8 percent but hours grew 5.3 percent. Total manufacturing productivity increased 7.5 percent over the last four quarters and 3.0 percent per year on average from 2000 through 2009.
Unit labor costs in manufacturing declined 5.9 percent in the second quarter of 2010 due to both the 4.1 percent increase in productivity and a 2.0 percent decline in hourly compensation. Unit labor costs fell 7.3 percent over the last four quarters, the largest four-quarter decrease since the series began in 1988.
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.
Preliminary data for the second quarter of 2010 for the nonfinancial corporate sector also were released today. Productivity declined 0.5 percent as output and hours increased 4.0 percent and 4.5 percent, respectively.
Revised measures
In the second quarter of 2010, nonfarm business sector productivity was revised down and unit labor costs were revised up as a result of a downward revision to output. In the manufacturing sector, productivity was revised down to 4.1 percent from 4.5 percent; hours were revised up more than output. Unit labor costs did not fall as fast as previously reported due to the downward revision to productivity.
In the first quarter of 2010, nonfarm business sector productivity was not revised, and manufacturing sector productivity was revised upwards. In both sectors, unit labor costs fell more than previously reported as hourly compensation was revised downward.
Nonfinancial corporate sector productivity growth in the first quarter of 2010 was revised down to 8.6 percent from 9.1 percent reflecting a downward revision to output. Unit labor costs were revised down as hourly compensation was revised down more than productivity.
