Academic journal article Monthly Labor Review

Measuring Quarterly Labor Productivity by Industry

Academic journal article Monthly Labor Review

Measuring Quarterly Labor Productivity by Industry

Article excerpt

Timely statistics on output, employment, and productivity are essential to understanding the performance of the U.S. economy. This study examines newly available quarterly GDP-by-industry statistics to determine whether they can be used to produce reasonable quarterly labor productivity measures at the industry level. The results show that the quarterly labor-productivity data at the industry level can provide insights into which industries are driving current aggregate economic performance. However, the quarterly industry data are highly volatile and are most useful when evaluated in conjunction with long-run trends in order to more precisely assess the business cycle dynamics.

Timely statistics on output, employment, and productivity are essential to understanding the performance of the U.S. economy. Labor productivity indicates how effectively labor inputs are converted into output and provides information needed to assess changes in technology, labor share, living standards, and competitiveness. The U.S. Bureau of Labor Statistics (BLS) produces both quarterly labor productivity measures for broad sectors of the U.S. economy and annual labor productivity measures for industries. (1) Quarterly labor productivity data are analyzed as indicators of cyclical changes in the economy and are closely watched by the financial community, nonfinancial businesses, government policymakers, and researchers. Industry-level productivity statistics provide a means for comparing trends in efficiency and in technological improvements across industries, and indicate which industries are contributing to growth in the overall economy. Although annual industry productivity data can be used to analyze past industry performance and long-term trends, they are not frequent enough to provide indicators of current industry performance or identify which industries are driving current aggregate economic performance. Industry-level labor input data are available on a quarterly basis, but corresponding quarterly industry-level output data for nonmanufacturing industries--data that are necessary for constructing labor productivity measures--have not been available until recently.

In April 2014, the U.S. Bureau of Economic Analysis (BEA) began releasing quarterly gross domestic product (GDP)-by-industry measures. (2) These new output measures were developed to be consistent with the annual industry accounts, and they appear to provide the data needed to construct more timely labor productivity measures. However, because complete output data are not yet available for all industries on a quarterly basis, these higher frequency data rely on assumptions about the relationships among industry inputs, outputs, and value added from the annual and benchmark statistics. This study examines the new quarterly GDP-by-industry statistics to determine whether they can be used to produce reasonable quarterly labor productivity measures at the industry level. This study develops quarterly labor hours and labor productivity measures for the 20 private industry groups for which BEA is releasing GDP-by-industry data. (3) In addition, the study evaluates the volatility in the quarterly productivity measures to determine the value of these industry data for better understanding the sources of economic growth--in order to provide recommendations.

BLS labor productivity measures

The preliminary and revised quarterly press release--"Productivity and Costs"--includes measures of labor productivity for six major U.S. sectors: business, nonfarm business, manufacturing, durable and nondurable goods manufacturing, and nonfinancial corporations. (4) Labor productivity measures are calculated as growth in real output relative to growth in hours worked. BLS calculates quarterly labor productivity for the business and nonfarm business sectors by combining real output from the National Income and Product Accounts (NIPA), produced by the BEA, with measures of hours worked, prepared by the BLS Productivity Program. …

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