1.3 percent in the business sector and
1.7 percent in the nonfarm business sector.
In the business sector, output increased 1.2 percent while hours were unchanged. In nonfarm businesses, output rose 1.4 percent and hours declined 0.3 percent. In both sectors, productivity grew more slowly than in the fourth quarter of 2006, when output per hour rose 1.5 percent in the business sector and 2.1 percent in the nonfarm business sector (seasonally adjusted annual rates).
In manufacturing, productivity changes in the first quarter were:
2.7 percent in manufacturing,
2.7 percent in durable goods manufacturing, and
2.0 percent in nondurable goods manufacturing.
Manufacturing productivity growth in the first quarter of 2007 reflected a 1.5-percent increase in output and a 1.1-percent decrease in hours worked in the sector. Output per hour had increased 1.9 percent in the fourth quarter of 2006, as both output and hours fell, by 2.1 percent and 3.9 percent, respectively. Output and hours in manufacturing, which includes about 13 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.
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.
Business
Productivity in the business sector rose 1.3 percent in the first quarter of 2007, as output grew 1.2 percent (seasonally adjusted annual rate)
and hours of all persons at work in the sector were unchanged. Revised data for the fourth quarter of 2006 showed that output per hour increased 1.5 percent, reflecting a 2.9-percent rise in output and a 1.4-percent increase in hours at work.
When the first quarter of 2007 is compared to the first quarter of 2006, productivity in the business sector grew 0.9 percent. This was the smallest four-quarter change since a 0.7-percent increase for the period from the fourth quarter of 1994 to the fourth quarter of 1995.
Hourly compensation increased 1.9 percent during the first quarter of 2007. This measure includes wage and salary accruals, supplements, employer contributions to employee benefit plans, and taxes. Hourly compensation had risen 7.7 percent in the previous quarter. Real hourly compensation, which takes into account changes in consumer prices, decreased 1.9 percent in the first quarter of 2007, after rising 10.0 percent in the fourth quarter of 2006.
Unit labor costs rose 0.7 percent in the first quarter of 2007, compared to a 6.2-percent increase in the fourth quarter. Growth in unit labor costs is roughly equivalent to the change in hourly compensation minus the change in output per hour.
The implicit price deflator for the business sector, which reflects changes in both unit labor costs and unit nonlabor payments, grew at a 3.7-percent rate in the first quarter, faster than the 1.0-percent rate in the final quarter of 2006.
Nonfarm business
Productivity rose 1.7 percent in the nonfarm business sector in first-quarter 2007, as output grew 1.4 percent and hours of all persons decreased by 0.3 percent (seasonally adjusted annual rates). From the first quarter of 2006 to the first quarter of 2007 output per hour grew 1.1 percent. In the fourth quarter of 2006, productivity had risen 2.1 percent, reflecting increases in output and hours of 2.9 percent and 0.8 percent, respectively.
Hourly compensation increased 2.3 percent in the first quarter of 2007, less rapidly than in the fourth quarter, when it grew 8.5 percent. When the rise in consumer prices was taken into account, real hourly compensation fell 1.5 percent in the first quarter, in contrast to a 10.8-percent increase in the fourth quarter of 2006.
Unit labor costs grew 0.6 percent in the first quarter of 2007, following a 6.2-percent rise one quarter earlier. The implicit price deflator for nonfarm business output rose 3.2 percent in the first quarter of 2007 and 0.5 percent in the fourth quarter of 2006.
Manufacturing
Productivity increased 2.7 percent in manufacturing in the first quarter of 2007, as output increased 1.5 percent and hours of all persons fell 1.1 percent (seasonally adjusted annual rates). After revisions, manufacturing productivity increased 1.9 percent in the fourth quarter of 2006, as output and hours decreased 2.1 percent and 3.9 percent, respectively. A 2.7-percent increase in durable goods manufacturing productivity in the first quarter was the smallest since a 1.1- percent rise in the third quarter of 2004. Output edged up 0.4 percent and hours fell 2.3 percent in the durable goods industries during the first quarter of 2007. Productivity in nondurable goods manufacturing posted a 2.0-percent gain in the first quarter, as output increased 2.9 percent and hours of all persons rose 0.8 percent.
The hourly compensation of all manufacturing workers increased 5.5 percent during the first quarter of 2007, and real hourly compensation rose 1.6 percent (seasonally adjusted annual rates). The 5.5-percent hourly compensation increase reflected a 6.6-percent jump in durable goods hourly compensation and a 3.6 percent gain in compensation per hour in nondurable goods industries.
Because hourly compensation of manufacturing workers rose more rapidly than productivity, unit labor costs increased in the first quarter, by 2.7 percent. Unit labor costs increased 3.8 percent in durable goods manufacturing; more than in the nondurable goods subsector, where these costs rose 1.6 percent.
Fourth-quarter and annual measures for nonfinancial corporations
Fourth-quarter and annual 2006 measures of productivity and costs also were announced for the nonfinancial corporate sector. Output per all-employee hour grew 1.0 percent from the third to the fourth quarter of 2006, as output rose 2.1 percent and employee hours increased 1.1 percent. The nonfinancial corporate sector includes all corporations doing business in the United States, except those classified as depository institutions, nondepository institutions, security and commodity brokers, insurance carriers, regulated investment offices, small business investment offices, and real estate investment trusts.
For the fourth quarter of 2006 hourly compensation in the nonfinancial corporate sector increased 8.2 percent, leading to an increase of 7.1 percent in unit labor costs. When consumer prices are taken into account, real hourly compensation jumped 10.5 percent. Unit profits fell 25.6 percent in the fourth quarter of 2006 after posting an increase of 31.8 percent in the previous quarter. The implicit price deflator grew 0.9 percent during the fourth quarter of 2006 after rising 0.5 percent in the third quarter.
When the annual average for 2006 was compared with that for 2005, labor productivity increased 2.5 percent in the nonfinancial corporate sector. From 2000 through 2005, output per hour had increased 3.0 percent per year on average. Output increased 4.8 percent in 2006, up from 4.0 percent in 2005, and hours rose 2.2 percent, compared with 1.6 percent during the previous year.
Hourly compensation grew 4.7 percent in 2006, and real hourly compensation increased 1.4 percent. The increase in hourly compensation was the largest in the series since 2000, when it had increased 7.1 percent. Total unit costs rose 1.5 percent, reflecting a 2.2-percent increase in unit labor costs and a 0.5-percent drop in unit nonlabor costs. Unit profits rose 12.2 percent in 2006, similar to the 12.6-percent gain one year earlier. The implicit price deflator, which reflects both the unit costs and unit profits measures, rose 2.7 percent in 2006.
Revised measures
In the business and nonfarm business sectors, productivity was revised up in the fourth quarter, primarily due to upward revisions to output. Hourly compensation was also revised up, which led to slightly larger increases in real hourly compensation than were reported March 6. Productivity was revised up more than hourly compensation, resulting in downward revisions to unit labor costs in the business and nonfarm business sectors.
Fourth-quarter productivity growth in the manufacturing sector was lower than reported March 6. Because hours fell less than reported in March, there were downward revisions to hourly compensation, real hourly compensation, and unit labor costs.
All of the 2006 annual average productivity and cost measures reported for the business and nonfarm business sectors and for manufacturing are similar to those reported in March.
