October 24, 2000 (The Editor’s Desk is updated each business day.)

U.S. factory costs dip compared to competitors

The index of unit labor costs in U.S. manufacturing in 1999 edged down to 80.1 percent of an index of competitors' costs measured in dollars; in 1998, the percentage was 83.5 percent. 

[Chart data—TXT]

The ratio in the chart is calculated with index numbers based so that the 1979 value of each index is 100.0; therefore, the ratio equaled 100.0 percent in 1979. By 1999, the index of 12 competitors' costs had grown by 61.3 percent compared to 29.2 percent for the U.S., resulting in a U.S. index that was about four-fifths as large as the competitors' index.

U.S. unit labor costs generally rose faster than competitors' costs between 1979 and 1985 on a U.S. dollar basis—in 1985, the ratio of U.S. costs to competitors' costs was 126.1 percent. Competitors' costs then grew relatively faster in the next 10 years, and in 1995 the ratio was down to 70 percent. Since then, however, the strength of the dollar has generally caused relative U.S. costs to rise, though not between 1998 and 1999.

Unit labor costs—the cost of the labor input required to produce one unit of output—are computed by dividing labor costs in nominal terms by real output. Unit labor costs also can be expressed as the ratio of hourly compensation to labor productivity.

International comparisons are the product of BLS Foreign Labor Statistics program. Because the economies covered in comparisons differ greatly in their relative importance to U.S. trade in manufactured goods, the indexes of relative unit labor costs are constructed on the basis of a trade-weighted average of unit labor costs in other economies. Read more about trade-weighted unit labor costs in "International Comparisons of Manufacturing Productivity and Unit Labor Cost Trends, 1999," news release USDL 00-295.