Tag: Productivity

Revised Manufacturing Labor Productivity Data Reflects Strong Gains

The Bureau of Labor Statistics revised its labor productivity figures for the first quarter, with very modest changes overall. Labor productivity for the manufacturing sector rose 3.5 percent for the quarter, just slightly lower than the original estimate of 3.8 percent. This increase stemmed from a 5.3 percent gain in output in the first quarter.

One area where there was a very significant revision was in the compensation and unit labor cost measures. This was true for all businesses, and I suspect that some of it could be tied to what we saw in the personal income data at year’s end as individuals worried about possible higher taxes related to the fiscal cliff deal. Hourly compensation for nonfarm businesses was revised from an earlier estimate of 2.7 percent to a new figure of 9.9 percent. I can only guess that this was due to accelerated end-of-year payouts, including dividend payments and bonuses, as companies sought to avoid possibly higher tax rates in 2013.

For manufacturers, hourly compensation was changed from a gain of 0.4 percent to an increase of 16.7 percent. As a result, unit labor costs for in the fourth quarter, which had originally been estimated to fall by 1.8 percent, were instead up by 14.0 percent. With such a dramatic shift, we see the reverse of that in the first quarter of 2013. Hourly compensation declined by 6.9 percent, with unit labor costs down by 10.0 percent.

Despite these large revisions, the larger storyline is still the same. Manufacturers increased their productivity fairly strongly in the first quarter of this year, assisted by higher output and by an ever-present desire to operate more leanly.

In the larger economy, labor productivity in the nonfarm business sector rose 0.5 percent, below its original estimate of 0.7 percent. Still, this was an improvement from the 1.7 percent decline in the prior quarter, and this gain was largely due to an increase in output of 2.1 percent.

Chad Moutray is chief economist, National Association of Manufacturers.

 

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Manufacturing Labor Productivity in First Quarter Was Up Strongly

The Bureau of Labor Statistics reported that labor productivity in the first quarter for the manufacturing sector rose 3.8 percent, its fastest pace since this time last year. The primary driver of the increase in productivity was higher output, which jumped 5.6 percent for the quarter for manufacturers. At the same time, hours rose just 1.7 percent, allowing overall unit labor costs to fall by 0.5 percent. These findings suggest that there has been some progress for manufacturing in terms of output and productivity in the past two quarters, an improvement from the weaker output experienced in the middle of last year.

Moreover, these benefits flowed through to both durable and nondurable goods businesses. Labor productivity for durable goods manufacturers rose 3.7 percent on output gains of 6.5 percent for the quarter; whereas, nondurable goods firms had a labor productivity increase of 4.6 percent on 4.7 percent higher output. Unit labor costs declined 0.6 percent and 0.8 percent, respectively, helping to make these firms more competitive globally. This represents a nice turnaround from 2012, which saw unit labor costs rise for both sectors.

For the larger economy, the productivity changes were less dramatic. Labor productivity in the nonfarm business sector rose 0.7 percent in the first quarter, an improvement from the 1.7 percent decline experienced in the fourth quarter. The shift from negative to positive between the two quarters stemmed from better output data. Real GDP increased 2.5 percent for the quarter, as noted last week, which while below expectations was still healthier than the paltry growth at year’s end. Unit labor costs for the nonfarm economy rose 0.5 percent, slowing from the 4.4 percent growth rate experienced the prior quarter.

Chad Moutray is chief economist, National Association of Manufacturers.

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Manufacturing Productivity Declines on Lower Output Growth in Third Quarter

The Bureau of Labor Statistics reported that manufacturing productivity fell 0.4 percent in the third quarter. It had been weaker in the second quarter, up just 0.2 percent, mainly from slower output growth. This trend continued into the third quarter, with output shrinking 0.6 percent after growing 1.5 percent in the second quarter and 10.2 percent in the first quarter. The number of hours worked in the third quarter also declined, off 0.2 percent. As a result, unit labor costs for manufacturers rose 1.5 percent.

Breaking these figures down by sector shows that output fell by 1.0 percent for durable goods industries and it was flat for nondurables. The output per hour for all persons (e.g., labor productivity) declined for both, down 0.7 percent and 0.1 percent, respectively. The number of hours worked by durable goods workers declined by 0.4 percent, with nondurable goods employees adding 0.1 percent hours of work in the quarter. Unit labor costs were higher for nondurable goods manufacturers (up 3.0 percent), with durable goods businesses having unit labor costs up 0.9 percent.

For the larger economy, the news was more positive. Nonfarm business labor productivity increased 1.9 percent in the third quarter, the same as was observed in the second quarter. Output grew 3.2 percent, an acceleration from the 2.1 percent growth seen in the second quarter. More importantly, unit labor costs fell 0.1 percent, helping to keep nonfarm businesses more competitive on the labor front. (continue reading…)

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Manufacturing Productivity Growth Eases in Second Quarter

The Bureau of Labor Statistics reported that manufacturing productivity eased in the second quarter, down from 5.5 percent in the first quarter to 0.2 percent. Output slowed considerably, growing by 1.7 percent versus 10.1 percent in the previous quarter. The number of hours worked also decelerated, and unit labor costs were up 0.3 percent.

The overall figures, though, skew the fact that labor productivity differed substantially between the durable and nondurable goods sectors. For durable goods, productivity grew 4.3 percent, with output up 6.2 percent. Unit labor costs, as a result, dropped 4.9 percent, helping the sector become more competitive globally.

On the other hand, nondurable goods activity contracted. Labor productivity among nondurable goods firms declined 4 percent, with output down 3.4 percent. Unit labor costs rose 7.2 percent for nondurables, with increased compensation costs outweighing the lower production levels.

For the larger economy, nonfarm business labor productivity rose 1.6 percent and output increased 2 percent. Unit labor costs were up 1.7 percent. These figures are an improvement from the negative productivity growth observed in the first quarter, which was the result of compensation outpacing output gains.

These numbers suggest that durable goods manufacturers continue to experience labor productivity gains that exceed others in the economy, and this is helping them drive growth. In addition, it is also fueling increased net job creation, as seen in recent labor data. Nondurable goods sectors, though, suffered from a steep drop in output in the second quarter. Nondurables have struggled so far in 2012, with a slight decline in labor productivity in the first quarter, as well, and output has been essentially flat year-to-date for the sector.

In summary, manufacturing activity has lessened with economic weaknesses slowing output for both durable and nondurables. For durables, this still suggests relatively strong growth, even with some easing. Nondurables, though, are contracting. Slowing global growth and economic and political uncertainties domestically are weighing heavily on manufacturers’ and consumers’ minds. It will be important for policymakers to act sooner rather than later to address these concerns.

Chad Moutray is chief economist, National Association of Manufacturers.

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Manufacturing Productivity Falls in Second Quarter

The Bureau of Labor Statistics reported that nonfarm business labor productivity fell 0.3 percent in the second quarter, with unit labor costs rising 2.2 percent. (All percentages are in annual rates of growth) For manufacturers, the drop was even steeper. After increasing by 4.2 percent in the first quarter (revised down from an earlier estimate of 6.1 percent), manufacturing productivity dropped 2 percent in the second quarter. Manufacturing output slowed significantly to a 0.6 percent growth rate in the first quarter, which was significantly slower than experienced in the months preceding it.

Manufacturing unit labor costs, which had fallen in the first quarter, rose 4.4 percent in the second quarter. Despite these numbers, unit labor costs for manufacturers over the past year have been flat, and productivity has risen 2.3 percent.

Parsing through the manufacturing data, one clearly sees a split between durable and nondurable goods productivity. After growing by 6.9 percent in the first quarter, the output per hour for all persons from durable goods industries decreased 3.5 percent in the second quarter. Overall output increased by 1.4 percent, however, which was well off of the 13.8 percent growth from the previous quarter, reflecting the supply chain disruptions and other challenges in the sector in the spring months.

Nondurable goods output, though, fell 0.2 percent in the second quarter, after growing by 2 percent in the first quarter. Nondurable manufacturing productivity rose by 1.2 percent, with unit labor costs up 1.8 percent for the quarter.

Overall, these numbers reflect weaknesses in the manufacturing sector in the second quarter. The slowdown can be seen in the lower growth rates for output, especially for durables but also for nondurables. As a result, unit labor costs which fell throughout much of the past year-and-a-half (a 4 percent decline in 2010, for instance), rose in the second quarter of this year.

To stay competitive, we will need a strong manufacturing sector, with renewed growth in output and continued gains in innovation and productivity to help keep those costs in check with our international competitors.

Chad Moutray is chief economist, National Association of Manufacturers.

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