Productivity and Costs, First Quarter 2007, Revised

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                              PRODUCTIVITY AND COSTS
                              First Quarter 2007, Revised
                              
                              
   The Bureau of Labor Statistics of the U.S. Department of Labor today 
reported revised productivity data--as measured by output per hour of all 
persons--for the first quarter of 2007.  The revised seasonally adjusted 
annual rates of productivity change in the first quarter were:

                  0.5 percent in the business sector and
                  1.0 percent in the nonfarm business sector.
    
In both sectors, the first-quarter productivity gains were smaller than the 
preliminary estimates reported on May 3, due to downward revisions to output 
growth.

   In manufacturing, the revised productivity changes in the first quarter 
were:

                  2.4 percent in manufacturing,
                  2.2 percent in durable goods manufacturing, and
                  1.8 percent in nondurable goods manufacturing.
                     
   Manufacturing productivity growth was slower in the first quarter of 
2007 than reported on May 3, reflecting downward revisions to output per hour 
in both durable goods and nondurable goods industries.  Output and hours in 
manufacturing, which includes about 12 percent of U.S. business-sector 
employment, tend to vary more from quarter to quarter than data for the 
aggregate business and nonfarm business sectors.  First-quarter measures are 
summarized in table A and appear in detail in tables 1 through 5.  

   The data sources and methods used in the preparation of the 
manufacturing series differ from those used in preparing the business and 
nonfarm business series, and these measures are not directly comparable.  
Output measures for business and nonfarm business are based on measures of 
gross domestic product prepared by the Bureau of Economic Analysis of the 
U.S. Department of Commerce.  Quarterly output measures for manufacturing 
reflect indexes of industrial production prepared by the Board of Governors 
of the Federal Reserve System.  See Technical Notes for further information 
on data sources. 


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Table A. Productivity and costs: Revised first-quarter 2007 measures
(Seasonally adjusted annual rates)
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                                                               Real
                                                     Hourly    hourly    Unit
                        Produc-                      compen-   compen-   labor
Sector                  tivity    Output    Hours    sation    sation    costs
------------------------------------------------------------------------------   
                              Percent change from preceding quarter
                                 
Business                 0.5        0.4      -0.1      2.5     -1.4      1.9
Nonfarm business         1.0        0.6      -0.4      2.8     -1.0      1.8
Manufacturing            2.4        1.2      -1.1      6.9      3.0      4.5
  Durable                2.2       -0.4      -2.5      8.5      4.5      6.2
  Nondurable             1.8        3.1       1.3      4.3      0.4      2.4
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                              Percent change from same quarter a year ago
                              
Business                 0.7        2.0       1.3      3.0      0.5      2.2
Nonfarm business         1.0        2.0       1.1      3.2      0.7      2.2
Manufacturing            3.5        2.4      -1.1      3.1      0.6     -0.4
  Durable                4.8        3.2      -1.5      4.2      1.7     -0.5
  Nondurable             1.8        1.4      -0.3      1.0     -1.4     -0.7
------------------------------------------------------------------------------  
  
  
Business

   Productivity rose 0.5 percent in the business sector from the fourth 
quarter of 2006 to the first quarter of 2007, as output increased 0.4 percent 
and hours worked by all persons declined 0.1 percent (seasonally adjusted 
annual rates). In the fourth quarter of 2006, output per hour increased 1.5 
percent, reflecting increases in output and hours of 2.9 percent and 1.4 
percent, respectively (table 1).  From first-quarter 2006 to first-quarter 
2007, business sector productivity posted the smallest four-quarter gain 
since the fourth quarter of 1995, when it also rose 0.7 percent.

   Hourly compensation increased at a 2.5 percent annual rate in the first 
quarter of 2007.  For the fourth quarter of 2006, hourly compensation growth 
was revised up to 10.4 percent from the 7.7-percent increase reported May 3.  
This measure of compensation includes wages and salaries, supplements, 
employer contributions to employee benefit plans, and taxes.  Real hourly 
compensation, which takes into account changes in consumer prices, declined 
1.4 percent in the first quarter of 2007 following a 12.8-percent gain in the 
previous quarter. 

   The change in unit labor costs approximates the change in hourly 
compensation less the change in productivity, and in the first quarter of 
2007 there was a 1.9-percent rise in these costs.  Unit labor costs grew 8.8 
percent per year in the fourth quarter of 2006, as revised.  The implicit 
price deflator for business output, which reflects changes in both unit labor 
costs and unit nonlabor payments, grew by 3.7 percent in the first quarter of 
2007.


Nonfarm business

   Productivity increased 1.0 percent in the nonfarm business sector during 
the first quarter of 2007, as output rose 0.6 percent and hours of all 
persons fell 0.4 percent (seasonally-adjusted annual rates).  The decline in 
nonfarm business hours worked was the first since 2003, when hours fell 2.1 
percent in the first quarter and 1.3 percent in the second quarter.  In 
fourth-quarter 2006, nonfarm productivity had increased 2.1 percent as output 
increased 2.9 percent and hours rose 0.8 percent (table 2).  The 1.0-percent 
increase in output per hour since the first quarter of 2006 is small compared 
to recent movements.  Nonfarm business productivity had increased at an 
average annual rate of 3.1 percent from 2000 through 2005.

   Hourly compensation increased 2.8 percent in the nonfarm business sector 
in the first quarter of 2007.  This measure had increased 11.2 percent in the 
fourth quarter of 2006, as revised.  When the rise in consumer prices is 
taken into account, real hourly compensation grew 13.6 percent in the fourth 
quarter of 2006, then declined 1.0 percent in the first quarter of 2007.

   Unit labor costs rose 1.8 percent during the first quarter of 2007, 
following an 8.9-percent increase in the fourth quarter of 2006, as revised. 
The implicit price deflator for nonfarm business output rose by 3.2 percent 
in the first quarter of 2007.


Manufacturing

   Productivity grew at a 2.4-percent annual rate in the manufacturing 
sector during the first quarter of 2007, the joint effect of a 1.2-percent 
increase in output and a 1.1-percent decrease in hours.  The 2.2-percent 
productivity gain in durable goods industries in the first quarter was due 
entirely to a 2.5-percent drop in hours worked, as output also declined, by 
0.4 percent.  Output per hour rose 1.8 percent in nondurable goods industries 
as output and hours both increased, by 3.1 percent and 1.3 percent, 
respectively (tables 3, 4, and 5).

   Hourly compensation in manufacturing grew 6.9 percent during the first 
quarter of 2007, following a gain of 11.8 percent one quarter earlier, as 
revised.  Hourly compensation rose 8.5 percent in durable goods industries 
and 4.3 percent in nondurable goods industries.  Real hourly compensation, 
which takes into account changes in consumer prices, increased 3.0 percent 
for all manufacturing workers, as a 4.5-percent rise in durable manufacturing 
real hourly compensation combined with a 0.4-percent rise in the nondurable 
goods industries.

   Unit labor costs rose 4.5 percent in manufacturing during the first 
quarter of 2007.    In durable goods industries, where hourly compensation 
increased much faster than productivity, unit labor costs increased 6.2 
percent.  In nondurable goods industries, unit labor costs rose 2.4 percent 
during the first quarter of 2007, but when the first quarter of 2007 is 
compared to the first quarter of 2006 nondurable manufacturing unit labor 
costs declined 0.7 percent.


Nonfinancial corporations

   Preliminary first-quarter 2007 measures of productivity and costs for 
nonfinancial corporations also were announced today (tables B and 6).  
Productivity rose 0.6 percent in the first quarter, as output increased 0.7 
percent and employee-hours edged up 0.1 percent (seasonally adjusted annual 
rates).  The 0.3-percent increase in output per hour from the first quarter 
of 2006 to the first quarter of 2007 was the smallest gain since a similar 
increase from the fourth quarter of 1992 to the fourth quarter of 1993.   The 
nonfinancial corporate sector includes all corporations doing business in the 
United States, except those classified as depository institutions, 
nondepository institutions, security and commodity brokers, insurance 
carriers, regulated investment offices, small business investment offices, 
and real estate investment trusts.


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Table B.  Nonfinancial corporations: Preliminary first-quarter 2007
productivity and cost measures
(Seasonally adjusted annual rates)
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                                           Real
                                  Hourly   hourly   Unit              Implicit
         Produc-                  compen-  compen-  labor   Unit      price
Period   tivity   Output  Hours   sation   sation   costs   profits   deflator
------------------------------------------------------------------------------
                     Percent change from preceding quarter
                     
2007 I    0.6      0.7     0.1      4.7      0.8      4.1      6.8      3.7
------------------------------------------------------------------------------
                     Percent change from same quarter a year ago
                     
2007 I    0.3      1.6     1.2      3.4      0.9      3.0     -1.9      2.0
------------------------------------------------------------------------------


   Hourly compensation rose 4.7 percent during the first quarter of 2007, 
following an 8.7- percent increase in the fourth quarter of 2006.  Taking the 
3.9-percent rise in consumer prices  into account, real hourly compensation 
increased 0.8 percent in the first quarter of 2007, in contrast to fourth-
quarter 2006 when real hourly compensation jumped 11.0 percent.  Unit labor 
costs in nonfinancial corporations rose 4.1 percent in the first quarter of 
2007.


REVISED MEASURES

   Previous and revised measures for the first quarter of 2007 in the 
business, nonfarm business, and manufacturing sectors are compared in table 
C.  Productivity growth was revised down in all sectors due to downward 
revisions to output growth.  Increases in hourly compensation and unit labor 
costs were revised up in all sectors for the first quarter of 2007 when 
compared to preliminary estimates reported May 3.


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Table C. Previous and revised productivity and related measures
(Quarterly percent change at seasonally adjusted annual rate)
------------------------------------------------------------------------------
                                                               Real
                                                     Hourly    hourly    Unit
                        Produc-                      compen-   compen-   labor
Sector                  tivity    Output   Hours     sation    sation    costs
------------------------------------------------------------------------------
                                    First quarter 2007
   
Business:                  
  Previous               1.3        1.2      0.0      1.9      -1.9        0.7
  Revised                0.5        0.4     -0.1      2.5      -1.4        1.9
Nonfarm business:                      
  Previous               1.7        1.4     -0.3      2.3      -1.5        0.6
  Revised                1.0        0.6     -0.4      2.8      -1.0        1.8
Manufacturing:                
  Previous               2.7        1.5     -1.1      5.5       1.6        2.7
  Revised                2.4        1.2     -1.1      6.9       3.0        4.5

                                    Fourth quarter 2006
   
Business:                  
  Previous               1.5        2.9      1.4      7.7      10.0        6.2
  Revised                1.5        2.9      1.4     10.4      12.8        8.8
Nonfarm business:                      
  Previous               2.1        2.9      0.8      8.5      10.8        6.2
  Revised                2.1        2.9      0.8     11.2      13.6        8.9
Manufacturing:                
  Previous               1.9       -2.1     -3.9      6.6       8.9        4.6
  Revised                1.9       -2.1     -3.9     11.8      14.2        9.8
  
                                    Annual average 2006
   
Business:                  
  Previous               1.7        3.8      2.1      4.8       1.5        3.1
  Revised                1.7        3.8      2.1      5.0       1.6        3.2
Nonfarm business:                      
  Previous               1.6        3.8      2.1      4.8       1.5        3.1
  Revised                1.6        3.8      2.1      5.0       1.6        3.3
Manufacturing:                
  Previous               4.0        5.0      1.0      3.7       0.4       -0.2
  Revised                4.0        5.0      1.0      4.1       0.7        0.1
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   Table C also presents preliminary and revised results for the fourth 
quarter and annual average of 2006.  Only hourly compensation and related 
measures were revised; productivity, output, and hours were not.  These 
revisions resulted from incorporation of revised data on employee 
compensation from the Bureau of Economic Analysis (BEA) of the U.S. 
Department of Commerce, released May 31.  The BEA compensation estimates 
reflect the introduction of revised wage and salary estimates for the fourth 
quarter.

   In the fourth quarter of 2006, increases in hourly compensation, real 
hourly compensation, and unit labor costs were revised up in all sectors.  
Annual averages of these measures for 2006 were also revised up, and unit 
labor costs in manufacturing now show a small increase rather than a small 
decline for the year.


REVISED MEASURES: NONFINANCIAL CORPORATIONS

   Fourth quarter and annual average 2006 measures were revised for the 
nonfinancial corporate sector.  Productivity increased at a 1.3-percent 
annual rate in the fourth quarter of 2006, reflecting growth in output and 
employee-hours of 2.4 percent and 1.1 percent, respectively.  An upward 
revision to hourly compensation outpaced the revision to productivity, and 
as a result unit labor costs rose slightly faster than reported May 3.  For 
the year 2006, growth in productivity, output, and hours were unchanged.


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Table D.  Nonfinancial corporations: Previous and revised productivity and 
cost measures
Quarterly percent changes at seasonally adjusted annual rates
------------------------------------------------------------------------------
                                           Real  
                                  Hourly   hourly   Unit              Implicit
         Produc-                  compen-  compen-  labor   Unit      price
         tivity   Output  Hours   sation   sation   costs   profits   deflator
------------------------------------------------------------------------------
                           Fourth quarter 2006
   
Previous    1.0      2.1   1.1      8.2      10.5     7.1   -25.6       0.9
Revised     1.3      2.4   1.1      8.7      11.0     7.3   -25.8       0.9

                           Annual average 2006

Previous    2.5      4.8   2.2      4.7       1.4     2.2    12.2       2.7
Revised     2.5      4.8   2.2      4.8       1.4     2.2    12.2       2.7
------------------------------------------------------------------------------


                              Next release date

   The next release of Productivity and Costs is scheduled for 8:30 AM EDT, 
Tuesday, Aug. 7, 2007.  Preliminary second-quarter measures for business, 
nonfarm business, and manufacturing will be released at that time.  The Aug. 
7 release also will incorporate the three-year revision of the National 
Income and Product Accounts.  


Table of Contents

Last Modified Date: June 06, 2007