PRODUCTIVITY AND COSTS
Fourth Quarter and Annual Averages 2021, Preliminary
Nonfarm business sector labor productivity increased 6.6 percent in the fourth quarter of 2021, the U.S. Bureau of Labor Statistics reported today, as output increased 9.2 percent and hours worked increased 2.4 percent. (All quarterly percent changes in this release are seasonally adjusted annual rates.) From the fourth quarter of 2020 to the fourth quarter of 2021, nonfarm business sector labor productivity increased 2.0 percent. (See table A1.) Annual average productivity increased 1.9 percent from 2020 to 2021. (See table C1.)
Unit labor costs in the nonfarm business sector increased 0.3 percent in the fourth quarter of 2021, reflecting a 6.9-percent increase in hourly compensation and a 6.6-percent increase in productivity. Unit labor costs increased 3.1 percent over the last four quarters. (See table A1.) BLS calculates unit labor costs as the ratio of hourly compensation to labor productivity. Increases in hourly compensation tend to increase unit labor costs and increases in productivity tend to reduce them.
Labor productivity, or output per hour, is calculated by dividing an index of real output by an index of hours worked by all persons, including employees, proprietors, and unpaid family workers. In the fourth quarter of 2021, both output and hours worked increased for the sixth consecutive quarter following historic declines in those measures in the second quarter of 2020. The fourth-quarter 2021 output index is 4.1 percent above the level seen in the fourth quarter of 2019, the last quarter not affected by the COVID-19 pandemic, while the hours worked index remains 0.4 percent below its fourth quarter 2019 level. (See tables A1 and 2.)
The nonfarm business labor productivity index is 4.5 percent higher in the fourth quarter of 2021 than it was in the fourth quarter of 2019, corresponding to an annual growth rate of 2.2 percent during the pandemic so far. This rate is higher than the 1.4-percent average annual growth rate during the previous business cycle--from 2007 to 2019--and slightly above the long-term average rate since 1947 of 2.1 percent.
Manufacturing sector labor productivity decreased 0.8 percent in the fourth quarter of 2021, as output increased 4.8 percent and hours worked increased 5.6 percent. In the durable manufacturing sector, productivity increased 0.8 percent, with a 3.9-percent increase in output and a 3.0-percent increase in hours worked. Nondurable manufacturing sector productivity decreased 3.7 percent, as 5.7-percent growth in output was outpaced by 9.8-percent growth in hours worked. Total manufacturing sector productivity increased 1.0 percent from the same quarter a year ago. (See tables A1, 3, 4, and 5.)
Manufacturing sector output is now 1.9 percent above its level in the fourth quarter of 2019, the last quarter not affected by the COVID-19 pandemic. Hours worked in manufacturing remain 2.0 percent below the fourth-quarter 2019 level. The manufacturing labor productivity index is 4.0 percent higher in fourth-quarter 2021 than in fourth-quarter 2019, corresponding to an annual labor productivity growth rate of 2.0 percent during that period. This rate is much higher than the 0.2-percent average annual growth rate during the previous business cycle--from 2007 to 2019--but is just below the long-term rate of 2.3 percent per year from 1987 to 2021. (See tables A1 and 3.)
Unit labor costs in the total manufacturing sector increased 4.2 percent in the fourth quarter of 2021, reflecting a 3.4-percent increase in hourly compensation and a 0.8-percent decrease in productivity. Manufacturing unit labor costs increased 3.2 percent from the same quarter a year ago. (See tables A1 and 3.)
The concepts, sources, and methods used for the manufacturing output series differ from those used in the business and nonfarm business output series; these output measures are not directly comparable. See the Technical Notes for a more detailed explanation.
Revised measures
Revised and previously published measures for the third quarter of 2021 are shown in tables A2 and B1 and cover the following major sectors: nonfarm business, business, manufacturing, and nonfinancial corporations.
In the third quarter of 2021, nonfarm business productivity was revised up 0.2 percentage point, to a decrease of 5.0 percent, rather than decreasing 5.2 percent as previously reported. (See table B1.) Unit labor costs in the nonfarm business sector increased 9.3 percent in the third quarter, rather than increasing 9.6 percent as previously reported.
In the manufacturing sector, productivity in the third quarter of 2021 was revised down 0.8 percentage point, to a decrease of 2.6 percent. Manufacturing unit labor costs increased 5.5 percent, a 0.9- percentage point upward revision from the previous estimate.
In the nonfinancial corporate sector, productivity was revised down 1.5 percentage points in the third quarter of 2021 to a decrease of 0.8 percent. This revision reflects a 1.6-percentage point downward revision to output to an increase of 5.2 percent. Hours worked were revised down 0.1 percentage point to an increase of 6.0 percent. (See table A2.)
Annual averages
Table C1 presents annual average changes for the most recent 5 years for the nonfarm business sector and the total manufacturing sector. Nonfarm business sector productivity grew 1.9 percent in 2021, as output increased 7.4 percent and hours worked increased 5.4 percent. The increases in output and hours are the largest annual increases since 1984, when the measures increased 8.5 percent and 6.1 percent, respectively.
Unit labor costs in the nonfarm business sector increased 3.3 percent in 2021, reflecting increases of 5.2 percent in hourly compensation and 1.9 percent in productivity. Real hourly compensation, which takes into account changes in consumer prices, increased 0.5 percent in 2021; consumer prices grew 4.7 percent in 2021, which was the highest annual growth rate since a 4.9 percent increase in 1990.
In the manufacturing sector, productivity increased 3.1 percent in 2021, reflecting an increase in output of 6.5 percent and an increase in hours of 3.3 percent. The increases in productivity and output were the largest annual increases since 2010, when both series increased 6.5 percent. The increase in hours was the largest annual increase in the series, which begins in 1987.
Manufacturing unit labor costs increased 1.4 percent in 2021. Manufacturing real hourly compensation decreased 0.2 percent, as hourly compensation increased 4.5 percent while consumer prices increased 4.7 percent.
Quarterly and annual data, where available, for all sectors from 2019 to 2021 appear in tables 1-6. Full historical measures can be found on the Productivity and Costs home page: www.bls.gov/lpc/#data.
The revised Productivity and Costs news release for fourth-quarter and annual averages 2021 is scheduled to be released on Thursday, March 3, 2022 at 8:30 a.m. (ET).
