Productivity Up During Fourth Quarter

By March 3, 2011Economy

Manufacturing continued its strong performance in boosting productivity and competitiveness during the fourth quarter of 2010 according to revised Bureau of Labor Statistics data released today.

Manufacturing led the economy in both the fourth quarter of 2010 and the full year.  For the fourth quarter, productivity (output per hour) in the manufacturing sector increased a very strong 5.9 percent, compared to the 2.3 percent increase in productivity for the economy as a whole. And for the full year of 2010, manufacturing productivity rose a phenomenal 6.7 percent, much faster than the 3.8 percent rate for the whole economy.

The manufacturing productivity increase for 2010 was nearly double the long-term average of 3.7 percent.  The productivity of American manufacturing is so strong that the average U.S. factory worker produced 43 percent more in the fourth quarter of 2010 than ten years ago. 

The rapid growth in productivity has helped U.S. competitiveness, in that while manufacturing labor compensation per hour rose 2.0 percent in 2010, unit labor costs in manufacturing fell 4.4 percent.  

 If manufacturing jobs are to increase in the future, output has to grow faster than productivity.  As the domestic demand for manufactured goods is not expected to grow as rapidly as productivity, faster output is going to depend on greater emphasis on exports.  The rest of the world economy – especially in Asia – is expected to outpace the U.S. economy, and that is where U.S. manufacturing can see the fastest gains.

The importance of exports to manufacturing is already evident in that the Census Bureau’s factory shipments data show that while manufacturing sales grew 9 percent overall in 2010, that was the result of 20 percent growth in exports and only 6 percent growth in domestic shipments.

Frank Vargo is the NAM vice president of international economic affairs.

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