Preliminary Multifactor Productivity Trends, 2007
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PRELIMINARY MULTIFACTOR PRODUCTIVITY TRENDS, 2007
Private Business Sector and Private Nonfarm Business Sector
Multifactor productivity, defined as output per combined units of labor and
capital inputs, grew at an annual rate of 0.7 percent in the private
business sector and 0.6 percent in the private nonfarm business sector
for 2007, the Bureau of Labor Statistics (BLS) and the U.S. Department
of Labor reported today.
2006-07
Private business sector 0.7
Private nonfarm business sector 0.6
The estimates of multifactor productivity in the private business and in
the private nonfarm business sectors for 2007 both show a slight increase
from 2006. The 2006-07 annual changes are summarized in tables A and B.
Table B also presents data showing historical trends.
Multifactor productivity is designed to measure the joint influences of
economic growth on technological change, efficiency improvements, returns
to scale, reallocation of resources, and other factors, 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 the change in hours of all persons engaged
in production.
Table A. Productivity and related data, percent changes 2006-07
Private Business1 Private Nonfarm
Business1
Productivity
Multifactor Productivity2 0.7 0.6
Output per hour of all persons 1.8 1.8
Output per unit of capital services -0.8 -0.9
Output 2.3 2.3
Inputs
Labor input3 0.9 1.0
Hours 0.4 0.5
Labor Composition4 0.5 0.5
Capital services 3.2 3.2
Combined units of labor and capital inputs5 1.6 1.7
Analytic ratio
Capital services per hour of all persons 2.7 2.7
1 Excludes government enterprises.
2 Output per unit of combined labor and capital inputs.
3 Index of hours at work by education and experience group, weighted by each
group’s share of labor compensation.
4 Ratio of labor input to hours.
5 Labor input index combined with capital services input index, weighted by
labor’s and capital’s shares of nominal output.
Private business sector
Chart 1 shows the annual indexes of multifactor productivity, output per hour
worked, and output per unit of capital services during the 1987-2007 period
for the private business sector. Over the last 20 years, capital services
have grown more rapidly than hours in the private business sector, and the
skills of workers -- as measured by their education and 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 0.7 percent for the private business sector in
2007 (see table A). The multifactor productivity gain in 2007 reflected a
2.3 percent increase in output and a 1.6 percent increase in the combined
inputs of capital and labor.
Capital services grew 3.2 percent. Labor input posted an increase of 0.9
percent, as both hours worked and labor composition rose. The capital-labor
ratio (capital services per hour of all persons) increased by 2.7 percent.
Labor input reflects the change in hours at work adjusted for the effects
of changing labor composition. The increase of labor input was due to an
increase in hours at work of 0.4 percent and an increase of 0.5 percent
in labor composition. Labor productivity (output per hour worked) increased
1.8 percent. Capital productivity (output per unit of capital services) fell
0.8 percent. As shown in table B, the contribution of labor composition rose
0.3 percent from 2006 to 2007, while the contribution of capital intensity
growth gained 0.9 percent over the same period.
Private nonfarm business sector
Multifactor productivity rose 0.6 percent for the private nonfarm business
sector in 2007 (see table A). The multifactor productivity gain in 2007
reflected a 2.3 percent increase in output and a 1.7 percent increase in the
combined inputs of capital and labor.
Capital services grew 3.2 percent. Labor input posted an increase of 1.0
percent, as both hours worked and labor composition rose. The capital-labor
ratio (capital services per hour of all persons) increased by 2.7 percent.
The increase of labor input was due to an increase of 0.5 percent in hours at
work and an increase of 0.5 percent in labor composition. Labor productivity
(output per hour worked) increased 1.8 percent. Capital productivity
(output per unit of capital services) fell 0.9 percent. The contribution of
labor composition rose 0.3 percent, while the contribution of capital
intensity growth gained 0.9 percentage points from the previous period
(see table B).
Table B. Compound average annual rates of growth in output per hour of all
persons and the contributions of capital intensity, labor composition, and
multifactor productivity, by major sector, 1987 to 2007
(percent per year)
1987-07 1987-90 1990-95 1995-00 2000-07 2006-07
Private business1
Output per hour
of all persons 2.2 1.6 1.5 2.7 2.7 1.8
Contribution of
capital intensity2 0.8 0.6 0.6 1.1 0.9 0.9
Contribution of
labor composition3 0.4 0.4 0.4 0.3 0.4 0.3
Multifactor
productivity4 1.0 0.6 0.5 1.3 1.4 0.7
Private nonfarm
business1
Output per hour
of all persons 2.2 1.5 1.6 2.5 2.6 1.8
Contribution of
capital intensity2 0.8 0.6 0.6 1.1 0.9 0.9
Contribution
of labor composition3 0.4 0.4 0.4 0.3 0.4 0.3
Multifactor
productivity4 1.0 0.5 0.5 1.1 1.3 0.6
1.Excludes government enterprises.
2.Growth rate in capital services per hour multiplied by capital's share
of current dollar costs.
3.Growth rate of labor composition (the growth rate of labor input less
the growth rate of the hours of all persons) multiplied by labor's share
of current dollar costs.
4.Output per unit of combined labor and capital inputs.
Note: Multifactor productivity plus contribution of capital intensity and
labor composition may not sum to output per hour due to independent rounding.
Comprehensive tables containing additional data not included in this news
release are available at http://www.bls.gov/mfp/mprdload.htm or in print
upon request.
Last Modified Date: May 06, 2008
Bureau of Labor Statistics
