The Bureau of Labor Statistics said that labor productivity in the manufacturing sector improved in the fourth quarter on stronger output growth. Manufacturing labor productivity rose 2.0 percent in the fourth quarter, rebounding from the decline of 0.1 percent in the third quarter.
For the year as a whole, labor productivity for the sector was up a modest 2.0 percent, a slight gain over the 1.8 percent increase observed in 2012. The annual growth in 2013 stemmed largely from durable goods firms, which outpaced the labor productivity growth of nondurable goods businesses by 3.1 percent to 1.4 percent, respectively.
Labor productivity for durable goods was up a healthy 3.4 percent, buoyed by an 8.8 percent jump in output growth. This was a nice improvement from the 1.0 percent increase in labor productivity and 3.2 percent growth in output for the durable goods sector seen in the third quarter. Unit labor costs declined in both quarters, however, down 0.9 percent and 2.7 percent, respectively. We have seen durable goods unit labor costs decline 11.6 percent since the end of 2009, helping to keep these manufacturers more competitive globally.
Nondurable goods manufacturers also had productivity improvements in the fourth quarter. Labor productivity for nondurable goods firms rose 1.0 percent in the fourth quarter, up from the 0.8 percent decline observed in the third quarter. This corresponded with a recovery in output growth from a decrease of 0.8 percent in the third quarter to a gain of 4.1 percent in the fourth quarter. Nonetheless, unit labor costs were higher in both quarters, up 4.0 percent and 0.7 percent, respectively. In the fourth quarter, this was due to output growth outpacing the increase in the average number of hours worked in the nondurable goods sector.
In the larger economy, nonfarm labor productivity grew 3.2 percent in the fourth quarter, expanding upon the 3.6 percent growth notched in the third quarter. For the year as a whole, however, nonfarm productivity was a more disappointing 0.6 percent, averaging just 0.9 percent over the past three years. In the fourth quarter, output growth picked up strongly, increasing by 4.9 percent. Unit labor costs were down 1.6 percent for the quarter, but were up 1.0 percent for 2013.
Chad Moutray is the chief economist, National Association of Manufacturers.