Labor productivity is calculated by dividing an index of real output by an index of the combined hours worked of all persons, including employees, proprietors, and unpaid family workers.
Unit labor costs in nonfarm businesses fell 4.4 percent in the fourth quarter of 2009, a result of the increase in productivity (6.2 percent) outpacing the increase in hourly compensation (1.5 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. Over the last four quarters, unit labor costs declined 2.8 percent, as hourly compensation and productivity increased 2.2 percent and 5.1 percent, respectively. This decline in unit labor costs was the largest since unit labor costs fell 3.2 percent over the four quarters ending with the first quarter of 2002.
Manufacturing sector productivity grew 7.8 percent in the fourth quarter of 2009, as output rose 6.1 percent and hours worked declined 1.6 percent. Productivity grew 6.2 percent in durable goods industries and 9.8 percent in nondurable goods industries in the fourth quarter. Over the last four quarters, manufacturing productivity increased 6.5 percent as output decreased 4.4 percent and hours fell 10.2 percent. Unit labor costs in manufacturing declined 7.4 percent in the fourth quarter of 2009 and decreased 3.2 percent from the same quarter a year earlier.
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.
