Nonfarm business sector labor productivity decreased at a 0.7 percent annual rate during the second quarter of 2011, the U.S. Bureau of Labor Statistics reported, with output and hours worked rising 1.3 percent and 2.0 percent, respectively. (All quarterly percent changes in this release are seasonally adjusted annual rates.) From the second quarter of 2010 to the second quarter of 2011, output increased 2.4 percent while hours rose 1.6 percent, yielding an increase in productivity of 0.7 percent.

Labor productivity, or output per hour, is calculated by dividing an index of real output by an index of hours worked of all persons, including employees, proprietors, and unpaid family workers.

Unit labor costs in nonfarm businesses rose 3.3 percent in the second quarter of 2011, because hourly compensation increased 2.7 percent while productivity decreased 0.7 percent. Over the last four quarters, hourly compensation increased more than output per hour, and unit labor costs rose 1.9 percent.

BLS defines 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 output per hour tend to reduce them.

Manufacturing sector productivity fell 1.5 percent in the second quarter of 2011, as output rose 1.2 percent and hours increased 2.7 percent. Productivity declined 2.7 percent in the durable goods sector and increased 1.3 percent in the nondurable goods sector. Over the last four quarters, total manufacturing productivity increased 2.4 percent. Unit labor costs in manufacturing rose 4.6 percent in the second quarter of 2011 and 0.4 percent over the last four quarters.

The data sources and methods used in the preparation of the manufacturing output series differ from those used in preparing the business and nonfarm business output series, and these measures are not directly comparable.

Preliminary data for the second quarter of 2011 for the nonfinancial corporate sector also were released. Productivity increased 4.4 percent as output and hours rose 7.5 percent and 3.0 percent, respectively.

Revised Measures

In the second quarter of 2011, nonfarm business productivity decreased 0.7 percent, rather than 0.3 percent, reflecting a downward revision of 0.5 percentage points to output; hours were not revised. Hourly compensation increased 2.7 percent in the second quarter, a larger gain than reported August 9. The increase in unit labor costs was revised up to 3.3 percent. In the manufacturing sector, productivity showed a smaller decline than previously reported, 1.5 percent, due to an upward revision to output; hours were revised up slightly. Unit labor costs increased 4.6 percent rather than 4.4 percent.

In the first quarter of 2011, nonfarm business productivity growth was not revised. Unit labor costs increased 6.2 percent, rather than the previous estimate of 4.8 percent, due solely to an upward revision to hourly compensation. The first-quarter increase in unit labor costs follows a 2.0 percent decline from 2009 to 2010, the largest in the annual series. In manufacturing, productivity growth was not revised. Unit labor costs fell 0.1 percent, rather than 1.1 percent, due to an upward revision to hourly compensation.

Nonfinancial corporate sector productivity growth in the first quarter of 2011 was revised up to 2.3 percent from the preliminary estimate of 1.4 percent.