For release 10:00 am (EDT) Wednesday, May 9, 2012 USDL-12-0893
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PRELIMINARY MULTIFACTOR PRODUCTIVITY TRENDS - 2011
Private nonfarm business sector multifactor productivity increased at a 0.5
percent annual rate in 2011, the U.S. Bureau of Labor Statistics reported
today. (See chart 1, table A.) The multifactor productivity gain in 2011
reflected a 2.4 percent increase in output and a 1.9 percent increase in
the combined inputs of capital and labor. The increase in combined inputs
of capital and labor was the largest annual rate of growth since 2006.
(See table 1.) Capital services grew by 1.7 percent and labor input –
which is the combined effect of hours worked and labor composition – grew
by 2.0 percent, the largest gain in the series since 2006. Capital services
per hour of all persons were unchanged in 2011 for the private nonfarm
business sector. Prior to this year, this measure had increased each year
with the exception of 1994, when it was also unchanged.
Multifactor productivity measures the change in output per unit of combined
capital and labor input. It is designed to measure the joint influences of
technological change, efficiency improvements, returns to scale, reallocation
of resources, and other factors on economic growth, allowing for the effects
of capital and labor. Multifactor productivity, therefore, differs from labor
productivity (output per hour worked) measures that are published quarterly
by BLS. Multifactor productivity includes information on capital services,
hours worked, and shifts in the composition of labor. Estimates of capital
services and labor composition are not included in the quarterly labor
productivity measures. Additionally, most of the source data needed to
construct multifactor productivity measures are not available quarterly.
Private business sector multifactor productivity grew by 0.3 percent in
2011, reflecting a 2.1 percent increase in output and a 1.9 percent increase
in the combined inputs of capital and labor. The increase in combined
inputs of capital and labor was the largest since 2006. (See table 2.)
Historical trends in the private nonfarm business sector
Multifactor productivity in the private nonfarm business sector grew 0.9
percent annually from 1987 to 2011. (See table A.) For the 2007-2011 period,
multifactor productivity grew 0.4 percent as combined inputs fell 0.5
percent, a larger decrease than the 0.1 percent decline in output. In
contrast, the 0.9 percent increase in multifactor productivity from 1987
to 2011 was primarily due to output rising at a 2.8 percent annual rate,
faster than the 1.9 percent increase in combined inputs. The gains in
output and combined inputs in 2011, 2.4 and 1.9 percent respectively, more
closely resembled the long-term trend from 1987 to 2011 than during the
2007-2011 period. (See table 1.)
Annual labor productivity growth can be viewed as the sum of three
components: multifactor productivity growth, the contribution of capital
intensity, and the contribution of shifts in labor composition. Output
per hour shifted sharply upwards after the 1990-1995 period. In particular,
the contribution of capital intensity to labor productivity growth became
more pronounced after 1995.
For the 2007-2011 period, the contribution of capital intensity remained
relatively high, increasing at a 1.2 percent annual rate. Output per hour
of all persons increased at a 2.0 percent annual rate, close to the 2.2
percent annual rate seen during the entire 1987-2011 period. This was due
to multifactor productivity increasing at a 0.4 percent annual rate from
2007 to 2011, slower than the gains of 1.3 and 1.4 percent that occurred
during the 1995-2000 and 2000-2007 periods, respectively.
(See chart 2, table B.)
In 2011, the contribution of capital intensity in the private nonfarm
business sector was unchanged. Combined with a modest 0.2 percent increase
in the contribution of labor composition and a 0.5 percent increase in
multifactor productivity, output per hour of all persons increased at a
0.7 percent annual rate. Labor productivity growth was much smaller than
the average increase of 2.0 percent from 2007 to 2011. (See table B.)
Table A. Compound annual growth rates for productivity, output, and inputs
in the private nonfarm business and private business sectors for selected
periods,1987-2011
In percent
1987- 1987- 1990- 1995- 2000- 2007- 2010-
2011 1990 1995 2000 2007 2011 2011
Private nonfarm business1
Productivity
Multifactor Productivity2 0.9 0.5 0.5 1.3 1.4 0.4 0.5
Output per hour of all
persons 2.2 1.4 1.6 2.7 2.6 2.0 0.7
Output per unit of
capital services -0.7 -0.4 -0.4 -1.0 -0.5 -1.5 0.6
Output 2.8 3.2 2.9 5.0 2.7 -0.1 2.4
Inputs
Combined inputs3 1.9 2.7 2.4 3.6 1.3 -0.5 1.9
Labor input4 1.1 2.3 2.0 2.5 0.4 -1.4 2.0
Hours 0.6 1.7 1.3 2.2 0.1 -2.0 1.7
Labor Composition5 0.5 0.6 0.7 0.3 0.3 0.6 0.3
Capital services 3.6 3.6 3.3 6.0 3.2 1.4 1.7
Analytic ratio
Capital services per
hour of all persons 2.9 1.9 1.9 3.8 3.1 3.5 0.0
Private business1
Productivity
Multifactor Productivity2 1.0 0.6 0.4 1.5 1.4 0.4 0.3
Output per hour of all
persons 2.2 1.6 1.5 2.9 2.7 2.0 0.4
Output per unit of
capital services -0.6 -0.4 -0.3 -0.8 -0.5 -1.4 0.4
Output 2.8 3.2 2.8 5.0 2.7 -0.1 2.1
Inputs
Combined inputs3 1.8 2.6 2.4 3.4 1.2 -0.5 1.9
Labor input4 1.0 2.1 2.0 2.4 0.3 -1.4 1.9
Hours 0.6 1.6 1.3 2.0 0.0 -2.0 1.7
Labor Composition5 0.5 0.6 0.7 0.3 0.3 0.6 0.2
Capital services 3.4 3.6 3.1 5.8 3.2 1.3 1.8
Analytic ratio
Capital services per
hour of all persons 2.9 2.0 1.8 3.7 3.1 3.4 0.1
1. Excludes government enterprises.
2. Output per combined units of labor input and capital services.
3. The growth rate of each input is weighted by its share of current dollar
costs.
4. Hours at work by age, education, and gender group are weighted by each
group’s share of the total wage bill.
5. Ratio of labor input to hours.
Table B. Compound annual growth rates in output per hour of all persons
and the contributions of capital intensity, labor composition, and
multifactor productivity in the private nonfarm business and private
business sectors for selected periods, 1987-2011
In percent
1987- 1987- 1990- 1995- 2000- 2007- 2010-
2011 1990 1995 2000 2007 2011 2011
Private nonfarm business1
Output per hour
of all persons 2.2 1.4 1.6 2.7 2.6 2.0 0.7
Contribution of
capital intensity2 0.9 0.6 0.6 1.2 1.0 1.2 0.0
Contribution of
labor composition3 0.3 0.4 0.5 0.2 0.2 0.4 0.2
Multifactor productivity4 0.9 0.5 0.5 1.3 1.4 0.4 0.5
Private business1
Output per hour
of all persons 2.3 1.6 1.5 2.9 2.7 2.0 0.4
Contribution of
capital intensity2 0.9 0.6 0.6 1.2 1.0 1.2 0.0
Contribution of
labor composition3 0.3 0.4 0.5 0.2 0.2 0.4 0.1
Multifactor productivity4 1.0 0.6 0.4 1.5 1.4 0.4 0.3
1. Excludes government enterprises.
2. Capital services per hour multiplied by capital's share of current
dollar costs.
3. Labor composition multiplied by labor's share of current dollar costs.
4. Output per combined units of labor input and capital services.
Note: Multifactor productivity plus contributions of capital intensity and
labor composition may not sum to output per hour due to independent
rounding.
