The Bureau of Labor Statistics reported that manufacturing productivity jumped 5.9 percent in the first quarter, reversing the previous quarter’s slower pace. Output per hour for all workers in the sector rose 10.8 percent. Durable goods figures were more dramatic, with labor productivity up 10.2 percent and output increasing 15.6 percent. Nondurable manufacturing numbers were 1.4 percent and 5.7 percent, respectively.
Manufacturing was a bright spot, as the larger macroeconomic figures reflect slower labor productivity growth. In the nonfarm business sector, output per hour for all workers fell 0.5 percent. The decline was due to growth in the number of hours worked (up 3.2 percent) outpacing the growth in output (up 2.7 percent). Nonfarm unit labor costs rose 2 percent.
Looking at annual averages for 2011, manufacturing labor productivity grew faster than the rest of the economy. Manufacturing productivity was up 2.5 percent for the year, outperforming the 0.4 percent gain for the nonfarm sector. Durable and nondurable manufacturing productivity were up 3.7 percent and 2.1 percent, respectively. Unit labor costs for the sector declined 0.6 percent for the year, helping to keep manufacturers more competitive globally. For durable goods, unit labor costs fell by 2.2 percent.
These numbers suggest that manufacturers continue to experience productivity gains that exceed others in the economy and help them drive growth. Manufacturing output grew 4.8 percent in 2011, with first quarter figures up dramatically. This will allow manufacturers to bring on more workers as the year progresses. Nonfarm job creation should also be positive from this analysis, with hiring helping to keep hours worked and output more in alignment.
Chad Moutray is chief economist, National Association of Manufacturers.