US PRODUCTIVITY AND COSTS First Quarter 2007, preliminary

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PRODUCTIVITY AND COSTS
First Quarter 2007, preliminary


The Bureau of Labor Statistics of the U.S. Department of Labor today
reported preliminary productivity data--as measured by output per hour of all
persons--for the first quarter of 2007. The seasonally adjusted annual rates
of productivity change in the first quarter were:

1.3 percent in the business sector and
1.7 percent in the nonfarm business sector.

In the business sector, output increased 1.2 percent while hours were
unchanged. In nonfarm businesses, output rose 1.4 percent and hours declined
0.3 percent. In both sectors, productivity grew more slowly than in the
fourth quarter of 2006, when output per hour rose 1.5 percent in the business
sector and 2.1 percent in the nonfarm business sector (seasonally adjusted
annual rates). First-quarter measures are summarized in table A and appear
in detail in tables 1 through 5.

In manufacturing, productivity changes in the first quarter were:

2.7 percent in manufacturing,
2.7 percent in durable goods manufacturing, and
2.0 percent in nondurable goods manufacturing.

Manufacturing productivity growth in the first quarter of 2007 reflected
a 1.5-percent increase in output and a 1.1-percent decrease in hours worked
in the sector. Output per hour had increased 1.9 percent in the fourth
quarter of 2006, as both output and hours fell, by 2.1 percent and 3.9
percent, respectively. Output and hours in manufacturing, which includes
about 13 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.


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Table A. Productivity and costs: Preliminary 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
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Percent change from preceding quarter

Business 1.3 1.2 0.0 1.9 -1.9 0.7
Nonfarm business 1.7 1.4 -0.3 2.3 -1.5 0.6
Manufacturing 2.7 1.5 -1.1 5.5 1.6 2.7
Durable 2.7 0.4 -2.3 6.6 2.6 3.8
Nondurable 2.0 2.9 0.8 3.6 -0.2 1.6
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Percent change from same quarter a year ago

Business 0.9 2.2 1.3 2.2 -0.3 1.3
Nonfarm business 1.1 2.2 1.1 2.4 0.0 1.3
Manufacturing 3.6 2.4 -1.1 1.5 -0.9 -2.0
Durable 4.9 3.4 -1.4 2.1 -0.3 -2.6
Nondurable 1.8 1.4 -0.4 0.4 -2.0 -1.4
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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 independently prepared by the Board
of Governors of the Federal Reserve System. See Technical Notes for further
information on data sources.


Business

Productivity in the business sector rose 1.3 percent in the first
quarter of 2007, as output grew 1.2 percent (seasonally adjusted annual rate)
and hours of all persons at work in the sector were unchanged. Revised data
for the fourth quarter of 2006 showed that output per hour increased 1.5
percent, reflecting a 2.9-percent rise in output and a 1.4-percent increase
in hours at work. (See table 1.)

When the first quarter of 2007 is compared to the first quarter of 2006,
productivity in the business sector grew 0.9 percent. This was the smallest
four-quarter change since a 0.7-percent increase for the period from the
fourth quarter of 1994 to the fourth quarter of 1995.

Hourly compensation increased 1.9 percent during the first quarter of
2007. This measure includes wage and salary accruals, supplements, employer
contributions to employee benefit plans, and taxes. Hourly compensation had
risen 7.7 percent in the previous quarter. Real hourly compensation, which
takes into account changes in consumer prices, decreased 1.9 percent in the
first quarter of 2007, after rising 10.0 percent in the fourth quarter of
2006.

Unit labor costs rose 0.7 percent in the first quarter of 2007, compared
to a 6.2-percent increase in the fourth quarter. Growth in unit labor costs
is roughly equivalent to the change in hourly compensation minus the change
in output per hour.

The implicit price deflator for the business sector, which reflects
changes in both unit labor costs and unit nonlabor payments, grew at a 3.7-
percent rate in the first quarter, faster than the 1.0-percent rate in the
final quarter of 2006.


Nonfarm business

Productivity rose 1.7 percent in the nonfarm business sector in first-
quarter 2007, as output grew 1.4 percent and hours of all persons decreased
by 0.3 percent (seasonally adjusted annual rates). From the first quarter of
2006 to the first quarter of 2007 output per hour grew 1.1 percent. In the
fourth quarter of 2006, productivity had risen 2.1 percent, reflecting
increases in output and hours of 2.9 percent and 0.8 percent, respectively.
(See table 2.)

Hourly compensation increased 2.3 percent in the first quarter of 2007,
less rapidly than in the fourth quarter, when it grew 8.5 percent. When the
rise in consumer prices was taken into account, real hourly compensation fell
1.5 percent in the first quarter, in contrast to a 10.8-percent increase in
the fourth quarter of 2006.

Unit labor costs grew 0.6 percent in the first quarter of 2007,
following a 6.2-percent rise one quarter earlier. The implicit price
deflator for nonfarm business output rose 3.2 percent in the first quarter of
2007 and 0.5 percent in the fourth quarter of 2006.


Manufacturing

Productivity increased 2.7 percent in manufacturing in the first quarter
of 2007, as output increased 1.5 percent and hours of all persons fell 1.1
percent (seasonally adjusted annual rates). After revisions, manufacturing
productivity increased 1.9 percent in the fourth quarter of 2006, as output
and hours decreased 2.1 percent and 3.9 percent, respectively. A 2.7-percent
increase in durable goods manufacturing productivity in the first quarter was
the smallest since a 1.1- percent rise in the third quarter of 2004. Output
edged up 0.4 percent and hours fell 2.3 percent in the durable goods
industries during the first quarter of 2007. Productivity in nondurable
goods manufacturing posted a 2.0-percent gain in the first quarter, as output
increased 2.9 percent and hours of all persons rose 0.8 percent.

The hourly compensation of all manufacturing workers increased 5.5
percent during the first quarter of 2007, and real hourly compensation rose
1.6 percent (seasonally adjusted annual rates). The 5.5-percent hourly
compensation increase reflected a 6.6-percent jump in durable goods hourly
compensation and a 3.6 percent gain in compensation per hour in nondurable
goods industries.

Because hourly compensation of manufacturing workers rose more rapidly
than productivity, unit labor costs increased in the first quarter, by 2.7
percent. Unit labor costs increased 3.8 percent in durable goods
manufacturing; more than in the nondurable goods subsector, where these costs
rose 1.6 percent.


Fourth-quarter and annual measures for nonfinancial corporations

Fourth-quarter and annual 2006 measures of productivity and costs also
were announced today for the nonfinancial corporate sector (tables B, C, and
6). Output per all-employee hour grew 1.0 percent from the third to the
fourth quarter of 2006, as output rose 2.1 percent and employee hours
increased 1.1 percent. 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.