June 13, 2001 (The Editor’s Desk is updated each business day.)

Long-term declines in unit labor costs among service-producing industries

Between 1990 and 1999, unit labor costs declined at an average annual rate of 2.0 percent or more in 8 of the service-producing industries measured by the Bureau of Labor Statistics.

[Chart data—TXT]

The largest decreases in unit labor costs in the 1990-99 period were in variety stores (-5.7 percent per year), and radio, television, computer, and music stores (-5.6 percent).  In an interesting contrast, the cost decline in variety stores was the result of a small decline in total compensation combined with an increase in output, while the cost decline in radio, television, computer, and music stores was the result of a significant rise in compensation being more than offset by increased output.

Other service-producing industries with substantial drops in labor costs were miscellaneous general merchandise stores (-3.5 percent per year), household appliance stores (-3.4 percent), used merchandise stores (-3.1 percent), retail nursery, lawn and garden supply stores (-2.8 percent), women’s clothing stores (-2.3 percent), and nonstore retailers (-2.0 percent).

Unit labor costs—the cost of the labor input required to produce one unit of output—are computed by dividing total compensation by real output.

This information is from the Industry Productivity Program. Data are subject to revision. Industries discussed in this article are at the 3-digit Standard Industrial Classification (SIC) level. Additional information is available from "Productivity and Costs: Service-Producing and Mining Industries, 1990-99" news release USDL 01-167.