Summary of Methods
Summary of Methods The methodology for preliminary estimates is discussed in “Preliminary estimates of multifactor productivity growth” located at http://www.bls.gov/opub/mlr/2005/06/art3abs.htm. This release uses a methodology for preliminary estimates that uses data that are available shortly after the end of the calendar year. The methodology is a simplified version of the full methodology that BLS uses when more detailed information is available. Preliminary estimates for the private nonfarm business sector are produced using the same methodology as that used for the production of estimates for the private business sector; the only difference is that the farm sector is excluded. Capital Input: Capital input measures the services derived from the stock of physical assets and software. The assets included are computers, software, communications and other information processing equipment, other fixed business equipment, structures, inventories, rental residences, and land. Investments, depreciation, capital income, and rental prices are estimated for each of these eight aggregates. Rental prices reflect the nominal rates of return and the rates of economic depreciation and revaluation for the specific asset. Rental prices are adjusted for the effects of taxes. Data on investments in physical assets are obtained from the Bureau of Economic Analysis (BEA). Capital input measures constructed for the preliminary MFP measures are based on less detail than those for the full MFP measures. Labor Input: Labor input in private business and private nonfarm business is obtained by chained superlative (Tornqvist) aggregation of the hours at work by all persons, classified by age, education, and gender with weights determined by their shares of labor compensation. Hours paid of employees are largely obtained from the Current Employment Statistics program (CES). These hours of employees are then converted to an at-work basis by using information from the Employment Cost Index (ECI) of the National Compensation Survey (NCS) and the Hours at Work Survey. Hours at work for nonproduction and supervisory workers are derived using data from the Current Population Survey (CPS), the CES, and the NCS. The hours at work of proprietors, unpaid family workers, and farm employees are derived from the Current Population Survey. Hours at work data reflect Productivity and Costs data as of the March 5, 2009 news release. Therefore it reflects the benchmark revisions to the CES and other revisions to hours released on February 6, 2009. The preliminary estimate of the 2008 labor composition index assumes that relative wages across groups remained constant between 2007 and 2008. The growth rate of labor composition is defined as the difference between the growth rate of weighted labor input and the growth rate of the hours of all persons. Additional information concerning data sources and methods of measuring labor composition can be found in BLS Bulletin 2426 (December 1993), "Labor Composition and U.S. Productivity Growth, 1948-90." Combined Inputs: Labor and capital input are combined using Tornqvist weights that represent each component's share of total costs. Total costs are defined as the value of output (Gross Product Originating) less a portion of taxes on production and imports. Most taxes on production and imports, such as excise taxes, are excluded from costs; however, property and motor vehicle taxes remain in total costs. The index uses changing weights: The share in each year is averaged with the preceding year's share. Output: This release presents data for the private business and private nonfarm business sectors. The private business sector, which accounted for approximately 77 percent of gross domestic product in 2000, includes all of gross domestic product except the output of general government, government enterprises, non-profit institutions, the rental value of owner-occupied real estate, and the output of paid employees of private households. Additionally, the private nonfarm business sector excludes farms from the private business sector, but includes agricultural services. Multifactor measures exclude government enterprises, while the BLS quarterly Productivity and Cost series include them. Multifactor Productivity: Multifactor productivity measures describe the relationship between output in real terms and the inputs involved in its production. They do not measure the specific contributions of labor, capital, or any other factor of production. Rather, multifactor productivity is designed to measure the joint influences of output, capital, and labor on economic growth of technological change, efficiency improvements, returns to scale, reallocation of resources due to shifts in factor inputs across industries, and other factors. The multifactor productivity indexes for private business and private nonfarm business are derived by dividing an output index by an index of labor input and capital services. The output indexes are computed as chained superlative indexes (Fisher Ideal indexes) of components of real output. BLS adjusts BEA output measures to remove the output of government enterprises.
Table of Contents
Last Modified Date: May 06, 2009