The Bureau of Labor Statistics reported that nonfarm productivity was up 2.9 percent in the third quarter. This is up sharply from the 1.9 percent estimate originally provided and was largely a factor of higher-than-originally-stated output. Indeed, real GDP was also revised higher last week and is now estimated to have gone up by 2.7 percent. The larger labor productivity numbers helped to push unit labor costs for the nonfarm sector down 1.9 percent in the third quarter for the second quarter in a row, helping to improve businesses’ costs and competitiveness.

For manufacturers, the opposite is true. The previous estimate said that manufacturing labor productivity fell by 0.4 percent in the third quarter; this revision pushes that to a decrease of 0.7 percent. Output also dropped 0.7 percent, and the number of hours was unchanged. The net result was that unit labor costs for the sector declined by 3.2 percent. Therefore, manufacturers have seen substantial unit labor cost increases so far in 2012, reversing the more positive news of 2010 and 2011 when productivity was helping to make the sector more competitive globally. Much of this shift can be explained by decelerating, or more recently falling, output.

It might also be instructive to separate out this discussion between durable and nondurable goods manufacturing. In the third quarter, nondurables fared better than durables. Output for nondurables rose 0.7 percent, which contrasts with a 1.9 percent drop for durables. This largely accounts for the difference in labor productivity between the two, with durable goods output per hour for all persons down 1.6 percent and nondurable productivity up 0.7 percent. With that said, unit labor costs for each were both higher, up 3.7 percent and 3.0 percent, respectively.

Chad Moutray is the chief economist, National Association of Manufacturers.

Two East Coast manufacturing surveys released this morning found that manufacturing output has expanded in the past month. This is notable because both of them have witnessed weaknesses in the summer and fall months, and recent improvements are highly welcome.

First, the Empire State Manufacturing Survey from the Federal Reserve Bank of New York observed a much-improved environment in the region. Its general business conditions index increased from 0.6 in November to 9.5 in December. This is two straight months of growth, following five consecutive months of contraction. In essence, manufacturing activity has gone from neutral last month to stronger growth this month.

Most of the key variables experienced growth from November, particularly for new orders, shipments and employment. Inventories, unfilled orders and the average employee workweek contracted. Raw material prices went up again, with the index for prices paid growing from 18.3 last month to 24.4 in December.

Manufacturers in the region are overwhelmingly positive about the new year. The forward-looking indicators were strong across-the-board, especially for new orders and shipments where over 60 percent of respondents said that they anticipated increases. (Given recent weaknesses in manufacturing activity, it is perhaps not surprising that the intensity of those suggesting increases in production should be so strong.) Other variables were also expected to grow over the coming months, including inventories, employment and capital expenditures.

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U.S. manufacturing remains the world’s largest manufacturer, despite an inaccurate report in today’s Financial Times that China has passed the United States. American manufacturing, in fact, is so large that if it were a self-standing economy, it would be the eighth largest in the world.

There are a number of errors in the data provided to the Financial Times by a private sector consultant. First, the report did not measure the physical quantity or volume of manufacturing, but rather measured current dollar output which is impractical due to price changes and exchange rate changes. Real Gross Domestic Product (GDP), and its manufacturing component, Real Manufacturing Value-Added, are the correct ways to measure economic output, because they are adjusted to remove the effect of price and exchange rate changes and measure real output.

The United Nations Statistics Division compiles global data on manufacturing value-added, and its most recent data shows the United States continues to lead, with close to 21 percent of all global manufacturing output in terms of constant dollars (real manufacturing value-added in 2009). China is the second largest, with about 15 percent of global manufacturing. No official data are available for 2010 yet, but given the gap between the top two manufacturers, China will not have surpassed the United States in 2010.

The second problem is that the consultant did not rely on official data in making its estimates. Rather than use the United Nations official data which is agreed upon by most economists as reliable, the consultant appears to have made its own assumptions. Using the consultant’s growth assumptions for China and the United States in 2010, and applying them to the official 2009 data shows that even in current dollars the United States remained the worlds’ largest manufacturer in 2010.

The U.S. Department of Commerce, which compiles the manufacturing value-added data, says that preliminary 2010 estimates will not be available until next month. In an effort to clarify the erroneous information provided to the Financial Times, the National Association of Manufacturers shared the data that shows the U.S. remains the world’s largest manufacturer.

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