In manufacturing, the preliminary productivity changes in the second quarter were:
1.6 percent in manufacturing,
4.7 percent in durable goods manufacturing, and
-1.9 percent in nondurable goods manufacturing.
Productivity in the total manufacturing sector grew 1.6 percent in the second quarter of 2007, as output increased 3.5 percent and hours increased 1.8 percent (seasonally adjusted annual rates). Growth in output and productivity was concentrated in the durable goods subsector. Output and hours in manufacturing, which includes about 12 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.
Business
From the first quarter to the second quarter of 2007, business sector labor productivity increased at a 2.6-percent annual rate. Output increased 3.8 percent and hours of all persons engaged in the sector-employees, proprietors, and unpaid family workers-rose 1.1 percent (seasonally adjusted annual rates). As revised, output per hour rose at the same 0.2 percent annual rate as output in the first quarter of 2007, hours worked were unchanged from the previous quarter.
Hourly compensation increased 5.3 percent in the second quarter of 2007, more than the 3.3 percent gain in the first quarter (seasonally adjusted annual rates). This measure of compensation includes wages and salaries, supplements, employer contributions to employee benefit plans, and taxes. Real hourly compensation, which takes into account changes in consumer prices, fell 0.7 percent during the second quarter of 2007 as consumer prices increased 6.0 percent (seasonally adjusted annual rates).
Unit labor costs, which reflect changes in both hourly compensation and productivity, increased 2.6 percent during the second quarter of 2007 after rising 3.1 percent in the previous quarter. From the second quarter of 2006 to the second quarter of 2007, these costs increased 4.7 percent-the largest four-quarter increase since unit labor costs increased 4.8 percent between the third quarter of 1999 and the third quarter of 2000. The implicit price deflator for the business sector, which reflects changes in both unit labor costs and unit nonlabor payments, increased 2.5 percent in the second quarter and 4.1 percent in the first quarter.
Nonfarm Business
Productivity increased 1.8 percent in the nonfarm business sector during the second quarter of 2007 as output grew 4.2 percent and hours of all persons increased 2.3 percent (seasonally adjusted annual rates). Revised results for first-quarter 2007 show that productivity increased 0.7 percent, output rose 0.3 percent, and hours declined 0.3 percent. Nonfarm business output per hour had increased at an average annual rate of 2.7 percent from 2000 through 2006.
Hourly compensation in the nonfarm business sector increased 3.9 percent in the second quarter of 2007, similar to a 3.7-percent rise one quarter earlier. When the 6.0-percent rise in consumer prices is taken into account, real hourly compensation fell 2.0 percent in the second quarter of 2007. It had fallen 0.2 percent in the first quarter.
Unit labor costs increased 2.1 percent in the second quarter of 2007 and 3.0 percent in the first quarter. As in the total business sector, unit labor costs increased more from the second quarter of 2006 to the second quarter of 2007, 4.5 percent, than during any four-quarter period since third-quarter 1999 to third-quarter 2000, when they increased 5.0 percent. The implicit price deflator for nonfarm business output grew 2.4 percent in the second quarter, following a 3.6-percent increase in the previous quarter.
Manufacturing
Productivity increased 1.6 percent in manufacturing, as output grew 3.5 percent and hours of all persons increased 1.8 percent (seasonally adjusted annual rates). All of the second-quarter productivity improvement occurred in durable goods industries, where productivity rose 4.7 percent, output grew 6.2 percent, and hours of all persons increased 1.5 percent. In nondurable goods industries, second-quarter productivity fell 1.9 percent reflecting increases in output of 0.3 percent and in hours of 2.3 percent. In the first quarter of 2007, total manufacturing productivity rose 1.7 percent, reflecting a 0.9-percent increase in output and a 0.8-percent decline in hours.
Hourly compensation of all manufacturing workers grew 2.8 percent during the second quarter of 2007, reflecting very different growth in the manufacturing subsectors. In durable goods industries, hourly compensation rose 1.5 percent, while in non-durable goods industries compensation per hour grew faster, 5.4 percent. When the increase in consumer prices is taken into account, the real hourly compensation of all manufacturing workers fell 3.0 percent in the second quarter after increasing 2.8 percent one quarter earlier.
Unit labor costs in manufacturing rose 1.2 percent in the second quarter of 2007, showing the combined effect of a 3.0 percent decline in durable goods industries and a 7.5 percent increase in nondurable goods industries.
