The accuracy of the BLS productivity measures (EXCERPT), Monthly Labor Review Online, Feb. 1999

The accuracy of the BLS productivity measures

Edwin R. Dean

The Bureau of Labor Statistics has made sustained efforts to improve its productivity measures. The goals of these efforts have been to enhance the reliability of the measures; to facilitate analysis of economic performance; and to provide useful information to the public.¹ The BLS clearly recognizes that, despite the beneficial results of its program, there is room for further improvement.

In the past several years, some have voiced concerns about the accuracy of the trends in the BLS productivity series, mainly to suggest that productivity growth for the business sector of the economy has been understated. The BLS has also been concerned about the accuracy of the major sector productivity trends and has devoted considerable effort to examining the accuracy of these trends.

The concerns about possible underestimation of productivity growth have been focused on data for the business sector of the economy, and especially the services components of that sector. “Services,” broadly defined, include all producing activities outside the “goods” sector. The major services-producing activities are transportation, communications, utilities, retail and wholesale trade, finance and insurance, and various additional services rendered to persons and businesses.² Commentators have wondered why productivity in services has not grown nearly as rapidly as productivity in manufacturing, particularly in light of anecdotal indications of improvements in several types of services.

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Footnotes

1 The evolution of this program is described in Edwin R. Dean, Michael J. Harper, and Mark K. Sherwood, “Productivity Measurement with Changing Weight Indices of Output and Inputs,” in Industry Productivity: International Comparison and Measurement Issues (Paris, the Organization for Economic Co-Operation and Development, 1996), pp. 183–215; and Edwin R. Dean and Michael J. Harper, “The BLS Productivity Measurement Program,” paper presented at the Conference on New Directions in Productivity Analysis of the Conference on Research on Income and Wealth, Washington, D.C., March 1998.

2 The “goods” and “services” sectors discussed in this article are based on an industry classification concept. GDP data are also disaggregated by type of product, which yields data for goods, services, and structures products. For data on GDP disaggregated by product, see Tables 1.3 and 1.4 in the Survey of Current Business, a publication of the Bureau of Economic Analysis. In these tables, the value of goods includes the producers’ value as well as the transportation costs and trade margins.

Possible measurement bias in aggregate productivity growth.—Feb. 1999.

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