Multifactor productivity, defined as output per combined units of labor and capital inputs, grew at an annual rate of 1.2 percent in the private business sector and 1.1 percent in the private nonfarm business sector for 2008, the Bureau of Labor Statistics (BLS) and the U.S. Department of Labor reported.
2007-08
Private business sector 1.2
Private nonfarm business sector 1.1
The estimates of multifactor productivity in the private business and in the private nonfarm business sectors for 2008 both show the largest annual rates of growth since 2005.
Multifactor productivity is designed to measure the joint influences of technological change, efficiency improvements, returns to scale, reallocation of resources, and other factors on economic growth while allowing for the effects of capital and labor. Multifactor productivity, therefore, differs from the labor productivity (output per hour worked) measures that are published quarterly by BLS since it includes information on capital services and other data that are not available on a quarterly basis. Additionally, multifactor productivity measures for the private business and private nonfarm business sectors account for shifts in the composition of labor. Estimates of labor composition are not included in the quarterly labor productivity measures.
In private business and private nonfarm business, the change in multifactor productivity reflects the difference between the change in real gross domestic product for the sector and the change in labor and capital inputs engaged in the production of this output. The output measures for private business and private nonfarm business are similar to the indexes of output for business and nonfarm business used in the quarterly labor productivity measures differing only in that the output of government enterprises is omitted.
A change in multifactor productivity reflects the change in output that cannot be accounted for by the change in combined inputs of labor and capital. In contrast, a change in labor productivity reflects the change in output that cannot be accounted for by a single factor - the change in hours of all persons engaged in production.
Over the last 21 years, capital services have grown more rapidly than hours in private business, and the skills of workers - as measured by their age and education, which implicitly measure their work experience - also have risen over this period. These shifts toward more capital intensive production and toward workers with more human capital have supplemented labor productivity growth, usually allowing output per hour to grow at a faster rate than multifactor productivity.
Multifactor productivity rose 1.2 percent for the private business sector in 2008. The multifactor productivity gain in 2008 reflected a 0.8-percent increase in output and a 0.3-percent decrease in the combined inputs of capital and labor.
Capital services grew 2.9 percent. Labor input posted a decrease of 1.9 percent, as both hours worked and labor composition fell. Labor input reflects the change in hours at work adjusted for the effects of changing labor composition. The decrease of labor input was due mostly to a decrease in hours at work of 1.9 percent and a decrease in labor composition of 0.1 percent. The capital-labor ratio (capital services per hour of all persons) increased by 4.9 percent.
Labor productivity (output per hour worked) increased 2.7 percent. Capital productivity (output per unit of capital services) fell 2.1 percent. The contribution of labor composition was unchanged from 2007 to 2008, while the contribution of capital intensity growth gained
1.6 percent over the same period.
Private nonfarm business sector
Multifactor productivity rose 1.1 percent for the private nonfarm business sector in 2008. The multifactor productivity gain in 2008 reflected a 0.8-percent increase in output and a 0.3-percent decrease in the combined inputs of capital and labor.
Capital services grew 3.0 percent. Labor input posted a decrease of 1.8 percent, as hours worked declined and labor composition rose slightly. The decrease of labor input was due to a decrease of 2.0 percent in hours at work and an increase of 0.1 percent in labor composition. The capital-labor ratio (capital services per hour of all persons) increased by 5.0 percent.
Labor productivity (output per hour worked) increased 2.8 percent. Capital productivity (output per unit of capital services) fell 2.0 percent. The contribution of labor composition rose 0.1 percent, while the contribution of capital intensity growth gained 1.6 percentage points from the previous period.
