Productivity Growth Revised

The Department of Labor's Bureau of Labor Statistics has revised its report on productivity in the third quarter of 2009. The bureau revised productivity down from 9.5 percent to 8.1 percent. Still, the productivity increase was the largest since the third quarter of 2003. The 8.1.-percent gain reflects a 2.9-percent increase in output and a 4.8 percent decline in hours worked.

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.

The revised productivity measures released were based on more recent and more complete data than were available for the preliminary report issued last month.

In the third quarter of 2009, unit labor costs fell 2.5 percent, as productivity grew at a faster rate (8.1 percent) than hourly compensation (5.4 percent). Unit labor costs declined 1.4 percent over the last four quarters. The bureau 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 grew 13.4 percent in the third quarter of 2009, as output rose 8.4 percent and hours worked fell 4.4 percent. The third quarter gain in manufacturing productivity was the largest since the bureau began the survey in 1987.