Technical Notes

Labor Productivity: The industry labor productivity measures describe the relationship 
between output and the labor time involved in its production.  They show the changes 
from period to period in the amount of goods and services produced per hour.  Industry 
output per hour indexes are prepared from data published by various public and private 
agencies, using the greatest level of industry detail available.
      Although the labor productivity measures relate output to hours of employees or 
all persons engaged in an industry, they do not measure the specific contribution of labor, 
capital, or any other factor of production.  Rather, they reflect the joint effects of many 
influences, including changes in technology; capital investment; level of output; 
utilization of capacity, energy, and materials; the use of purchased services inputs, 
including contract employment services; the organization of production; managerial skill; 
and the characteristics and effort of the workforce.
      Long-term productivity trends tend to be more reliable indicators of the 
performance of an industry than are year-to-year changes.  The annual changes in an 
industry’s output and use of labor may reflect cyclical changes in the economy as well as 
long-term trends.  Also, annual productivity indexes are based on sample data, which are 
likely to differ from data generated by a census of establishments in the industry.

Output:  Industry output is measured as sectoral output, the total value in real terms of 
goods and services produced for sale outside the industry.  Real industry output is most 
often derived by deflating nominal value of production.  Wherever possible, the indexes 
of industry output are calculated with a Törnqvist formula.  This formula aggregates the 
growth rates of the various industry outputs between two periods, using their relative 
shares in industry value of production, averaged over the two periods, as weights.
      Industry output measures for manufacturing industries are constructed using data 
from the economic censuses and annual surveys of the Bureau of the Census, U.S.  
Department of Commerce, together with information on price changes primarily from the 
Bureau of Labor Statistics.

Labor Hours:  The primary source of data on industry employment and hours is the BLS 
Current Employment Statistics (CES) survey.  The CES provides monthly data on the 
number of total and production worker jobs held by wage and salary workers in nonfarm 
establishments, as well as data on the average weekly hours of production workers in 
those establishments.  CES data are supplemented or further disaggregated for some 
industries using data from the BLS Quarterly Census of Employment and Wages 
(QCEW), the Bureau of the Census, or other sources.  Data from the Current Population 
Survey (CPS) are also used to supplement the CES data.  The industry productivity 
program estimates the average weekly hours of nonproduction workers for each industry 
using data from the CPS together with the CES data.  The hours of production and 
nonproduction workers are treated as homogeneous and are directly aggregated.  

Unit Labor Costs:  The unit labor costs represent the cost of labor input required to 
produce one unit of output.  The indexes of unit labor costs are computed by dividing an 
index of industry labor compensation by an index of real industry output.  Unit labor 
costs also describe the relationship between compensation per hour and real output per 
hour (labor productivity).  Increases in hourly compensation increase unit labor costs; 
increases in labor productivity offset compensation increases and lower unit labor costs.  
	Compensation, defined as payroll plus supplemental payments, is a measure of 
the cost to the employer of securing the services of labor.  Payroll includes salaries, 
wages, commissions, dismissal pay, bonuses, vacation and sick leave pay, and 
compensation in kind.  Supplemental payments include legally required expenditures and 
payments for voluntary programs.  The legally required portion consists primarily of 
Federal old age and survivors’ insurance, unemployment compensation, and workers’ 
compensation.  Payments for voluntary programs include all programs not specifically 
required by legislation, such as the employer portion of private health insurance and 
pension plans.
      
Other Notes:  The measures in this news release incorporate revised data from the 
Census Bureau’s 2006 Annual Survey of Manufactures (ASM) and the annual benchmark 
revision of the BLS Current Employment Statistics (CES) survey published in February 
2008.  These measures replace the manufacturing series published in the news release 
Productivity and Costs by Industry: Manufacturing, 2005 (released April 19, 2007) and 
in table 51 of the Monthly Labor Review.  All of the measures for 2006 in this release are 
preliminary and subject to revision.  
	The industries reported on in this release are classified according to the 2002 
NAICS.  Industry productivity measures will be classified according to the 2007 NAICS 
in 2009, with the publication of manufacturing industry data for 2007.
      Published industry productivity and related indexes and rates of change can be 
accessed electronically by visiting the Labor Productivity and Costs web site at 
http://www.bls.gov/lpc/home.htm.  Data on industry employment, hours, labor 
compensation, value of production, and the implicit price deflator for output for these 
industries are available upon request by calling the Division of Industry Productivity 
Studies (202-691-5618) or by sending a request by e-mail to dipsweb@bls.gov.  While 
the index numbers and rates of change reported by BLS in this news release are rounded 
to one decimal place, all industry productivity percent changes are calculated using index 
numbers to three decimal places. 
      Material in this report is in the public domain and, with appropriate credit, may be 
used without permission.  Information in this report will be made available to sensory-
impaired individuals upon request.  Voice phone: 202-691-5618; TDD message referral 
phone number: 1-800-877-8339.