Technical note
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.
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Last Modified Date: March 20, 2008