For release 10:00 a.m. (EDT) Thursday, August 11, 2011 USDL-11-1188
Technical information: (202) 691-5606 • mfpweb@bls.gov • www.bls.gov/mfp
Media contact: (202) 691-5902 • PressOffice@bls.gov
MULTIFACTOR PRODUCTIVITY TRENDS IN MANUFACTURING - 2009
Manufacturing sector multifactor productivity declined at a 5.7 percent annual
rate in 2009, the U.S. Bureau of Labor Statistics reported today.
(See chart 1.) This was the largest annual decline in multifactor productivity
since the series started in 1987. (See table 1.) The multifactor productivity
decline in 2009 reflected a 12.5 percent decrease in output and a 7.2 percent
decrease in combined inputs.
Multifactor productivity measures the change in output per unit of combined
inputs. Multifactor productivity is designed to measure the joint influences
on economic growth of technological change, efficiency improvements, returns
to scale, reallocation of resources, and other factors, allowing for the
effects of capital, labor and, in the case of the manufacturing sector, also
intermediate inputs (energy, materials, purchased business services).
Multifactor productivity, therefore, differs from labor productivity
(output per hour worked) measures that are published quarterly by BLS since it
includes information on capital services and intermediate inputs that are not
available on a quarterly basis.
Durable manufacturing sector multifactor productivity decreased 8.0 percent in
2009, after increasing 2.2 percent in 2008. Nondurable manufacturing sector
multifactor productivity fell 3.1 percent in 2009, following a 2.2 percent
decrease in 2008. In both sectors these were the sharpest declines in
multifactor productivity since the series began in 1987.
Historical trends in manufacturing
Multifactor productivity in manufacturing grew 1.1 percent annually between
1987 and 2009. Over the same period, sectoral output increased at a 1.5
percent annual rate and combined inputs grew 0.4 percent; output per hour
(labor productivity) increased 3.3 percent. For the 2000-2007 period,
multifactor productivity in manufacturing grew more rapidly than in previous
periods, averaging 2.0 percent per year. In contrast, for the 2007-2009
period, multifactor productivity dropped 3.0 percent and output and all inputs
except capital services experienced steep declines. (See table A.)
Of the 3.3 percent growth rate in labor productivity for the 1987-2009 period,
1.1 percent can be attributed to increases in multifactor productivity, 0.7
percent to the contribution of capital intensity, 0.1 percent to energy
intensity, 0.9 percent to materials intensity, and 0.5 percent to purchased
business services intensity. Multifactor productivity, the contribution of
intermediate inputs, and the contribution of capital intensity may not sum to
output per hour due to independent rounding. (See table B.)
In 2009, almost no manufacturing industries exhibited increases in multifactor
productivity, output, or combined inputs. Of the 18 industries that comprise
the manufacturing sector, only computer and electronic products experienced
growth in multifactor productivity, and only food, beverage, and tobacco
products exhibited growth in combined inputs. No industry had any increase in
output. (See chart 2.)
Revised measures
Previous and revised productivity measures and related data for 2007 and 2008
for the manufacturing, durable manufacturing, and nondurable manufacturing
sectors are displayed in table C. In 2008, multifactor productivity growth was
revised upward, showing a slight decline of 0.1 percent rather than the 0.7
percent decrease reported previously. After revision, multifactor productivity
for the nondurable manufacturing sector fell 2.2 percent rather than falling
1.6 percent. In contrast, multifactor productivity in the durable
manufacturing sector was revised upward to 2.2 percent from 0.3 percent. The
revisions in both years were due to comprehensive revisions in source data in
the revised National Income and Products (NIPA) released on May 25, 2010 and
annual revisions of the NIPA industry accounts released on December 14, 2010.
The manufacturing industry measures have been revised to reflect an improved
methodology for estimating the cost of materials. This revision is most
notable in measures for apparel, leather, and allied products, and computer
and electronic products.
Table A. Compound annual growth rates for productivity, sectoral output, and
inputs in the manufacturing sector for selected periods, 1987 to 2009
In percent
1987-2008 1987-1990 1990-1995 1995-2000 2000-2007 2007-2008
Productivity
Multifactor
productivity1 1.6 0.2 1.2 2.1 2.6 -0.7
Output per hour
of all persons 3.5 1.8 3.4 4.8 3.9 -0.3
Output per unit
of capital services 0.0 -0.1 0.6 0.7 -0.1 -5.4
Sectoral Output 2.2 2.1 3.3 4.7 0.7 -4.4
Inputs
Combined inputs2 0.6 1.9 2.1 2.5 -1.8 -3.7
Hours3 -1.2 0.4 -0.1 -0.1 -3.1 -4.0
Capital services 2.2 2.3 2.7 4.0 0.8 1.1
Energy 0.5 1.8 1.6 5.8 -3.8 -2.6
Non-energy
materials 1.4 1.7 3.6 5.5 -2.2 -5.3
Purchased business
services 1.1 5.2 3.2 0.6 -0.9 -5.4
1Output per unit of combined hours, capital services, energy, materials,
and purchased business services inputs.
2The growth rate of each input is weighted by its share of current dollar
costs.
3Hours at work of all persons.
Table B. Compound annual growth rates in output per hour of all persons and
contributions of capital intensity, intermediate inputs intensity, and
multifactor productivity in the manufacturing sector for selected periods,
1987-2008
In percent
1987-2008 1987-1990 1990-1995 1995-2000 2000-2007 2007-2008
Manufacturing
Output per hour
of all persons 3.5 1.8 3.4 4.8 3.9 -0.3
Contribution of
capital intensity1 0.6 0.3 0.4 0.7 0.7 1.0
Contribution of
information
processing
equipment
and software2 0.2 0.2 0.2 0.4 0.2 0.3
Contribution
of all
other capital
services 0.3 0.1 0.2 0.3 0.5 0.8
Contribution of
intermediate inputs3 1.2 1.3 1.7 1.9 0.6 -0.6
Contribution
of energy
intensity4 0.1 0.0 0.0 0.2 0.0 0.1
Contribution
of materials
intensity5 0.8 0.4 1.1 1.6 0.2 -0.4
Contribution
of purchased
business
services
intensity6 0.4 0.8 0.6 0.1 0.4 -0.2
Multifactor
productivity7 1.6 0.2 1.2 2.1 2.6 -0.7
1Growth rate in capital services per hour multiplied by capital's share of
current dollar costs.
2Growth rate of information processing equipment and software per hour
multiplied by its share of total current dollar costs.
3Growth rate in intermediate inputs per hour multiplied by intermediate inputs
share of current dollar costs.
4Growth rate in energy services per hour multiplied by energy’s share of
current dollar costs.
5Growth rate in materials services per hour multiplied by materials’ share of
current dollar costs.
6Growth rate in business services per hour multiplied by business services’
share of current dollar costs.
7 Output per unit of combined hours, capital services, energy, materials, and
business services inputs.
Table C. Previous and revised productivity and related measures for the
2006-2007 and 2005-2006 periods
Inputs
Purc-
Multi- Sect- Com- Cap- hased
factor oral bined ital busi-
Product- out- In- Serv- Mater- ness
Sector ivity1 put puts2 Hours3 ices Energy ials services
Annual percent change,
2006-2007
Manufacturing
Previous 4.7 1.6 -3.0 -1.7 0.5 -2.7 -8.1 -0.3
Revised 5.1 2.4 -2.5 -1.7 1.2 6.0 -7.2 -0.8
Durable manufacturing
Previous 6.0 2.1 -3.7 -2.1 0.6 -3.8 -11.1 0.2
Revised 4.9 3.5 -1.3 -2.1 0.8 8.6 -4.8 2.2
Nondurable manufacturing
Previous 3.0 1.1 -1.8 -1.1 0.4 -2.0 -3.5 -0.9
Revised 4.6 1.3 -3.2 -1.0 1.4 4.3 -6.4 -4.7
Annual percent change,
2005-2006
Manufacturing
Previous 2.5 1.6 -0.9 0.7 0.5 -6.7 -2.5 -1.2
Revised 2.3 1.5 -0.7 0.7 0.9 -7.8 -1.7 -1.6
Durable manufacturing
Previous 4.2 3.1 -1.0 1.1 0.4 -7.5 -4.0 -0.9
Revised 3.2 3.1 -0.1 1.1 1.0 -5.0 -1.4 -0.4
Nondurable manufacturing
Previous 0.6 -0.1 -0.6 0.1 0.6 -6.3 -0.5 -1.5
Revised 1.1 -0.1 -1.2 0.0 0.8 -9.6 -1.2 -3.1
1Output per unit of combined hours, capital services, energy, materials, and
purchased business services inputs.
2The growth rate of each input is weighted by its share of current dollar
costs.
3Hours at work of all persons.
TECHNICAL NOTES
Capital Services: Capital services are the services derived from the stock of
physical assets and software. There are 86 asset types for fixed business
equipment and software, structures, inventories, and land. The aggregate
capital services measures are obtained by Tornqvist aggregation of the capital
stocks for each asset type within each of the eighteen manufacturing NAICS
industry groupings using estimated rental prices for each asset type. Each
rental price reflects the nominal rate of return to all assets within the
industry and rates of economic depreciation and revaluation for the specific
asset; rental prices are adjusted for the effects of taxes. Data on
investments in physical assets and software are obtained from Bureau of
Economic Analysis (BEA). Nonfarm industry detail for land is based on IRS
book value data.
Labor Hours: The construction of the hours measures follows the methodology
described in USDL 11-0435, Multifactor Productivity Trends, 2009,
http://www.bls.gov/news.release/pdf/prod3.pdf. Hours in manufacturing are
directly aggregated and do not include the effects of labor composition.
Hours data for the manufacturing multifactor productivity measures include
hours for all persons working in the manufacturing sector – wage and salary
workers, the self-employed and unpaid family workers. The primary source
of hours data is the BLS Current Employment Statistics (CES) survey. Hours
paid of production workers are also obtained primarily from the CES survey.
The hours of these employees are then converted to an at-work basis by using
information from the Employment Cost Index (ECI) of the National Compensation
Survey (NCS) and the BLS Hours at Work Survey. Hours at work for nonproduction
workers are derived using data from the Current Population Survey (CPS), the
CES, and the NCS. The hours at work of proprietors are derived from the CPS.
Hours at work data are based on underlying hours data published in the February
3, 2011, USDL-11-0128, Productivity and Costs,
http://www.bls.gov/news.release/archives/prod2_02032011.pdf. Therefore, the
data do not reflect the benchmark revisions to the CES and other revisions to
hours released on February 4, 2011.
Intermediate Inputs: In manufacturing, intermediate inputs consist of energy,
materials, and purchased business services, and represent a large share of
production costs. Research has shown that substitution among inputs, including
intermediate inputs, affects productivity change. Therefore, it is important
to account for intermediate inputs in productivity measures at the level of
manufacturing. In contrast, the more aggregate productivity measures compare
"value-added" output with two classes of inputs, capital and labor. Because
of these differences in concepts and methodology, productivity change in
manufacturing cannot be directly compared with changes in private business or
private nonfarm business.
Data on intermediate inputs are obtained from BEA based on BEA annual
input-output tables. Tornqvist indexes of each of these three input classes
are derived at the 3-digit NAICS level and then aggregated to total
manufacturing. Materials inputs are adjusted to exclude transactions between
establishments within the same sector.
Combined Inputs: The five input indexes (capital services, hours, energy,
materials, and purchased business services) are combined using Tornqvist
aggregation, employing weights that represent each component's share of total
costs. Total costs are defined as the value of manufacturing sectoral output.
Capital Intensity: Capital intensity is the ratio of capital to hours worked
in the production process. The higher the capital to hours ratio, the more
capital intensive the production process is. Intermediate input intensities
are also estimated and interpreted in a similar manner to capital intensity.
In a production process, profit maximizing/cost-minimizing firms adjust the
factor proportions of capital and labor if the price of one factor is less
than the other factor; there would be a tendency for the firms to substitute
the less expensive factor for the more expensive one. In the short run,
changes in hours worked are more variable than changes in capital services.
Changes in hours worked in business cycles can result in volatility of the
capital intensity ratio over short periods of time. In the long run an
increase in wages relative to the price of capital will induce the firm to
substitute capital for labor, resulting in an increase in capital intensity.
Rising labor costs are, in fact, an incentive for firms to introduce
automated production processes. Industry estimates of capital to hours ratios
can be obtained at http://www.bls.gov/mfp/mprdload.htm.
Sectoral Output: The output concept used for multifactor productivity in
manufacturing is “sectoral output”. Sectoral output equals gross output
(sales, receipts, and other operating income, plus commodity taxes plus
changes in inventories), excluding transactions between establishments within
the same sector. In contrast, the output concept used for private business and
nonfarm business is “real value added”. Real value added output in private
business equals gross domestic product in the economy less general government,
government enterprises, private households (including the rental value of
owner-occupied real estate), and non-profit institutions. Real value added
output excludes intermediate transactions between businesses.
The output index for manufacturing is computed using a chained superlative
index (Tornqvist) of three-digit NAICS industry outputs. Industry output is
measured as sectoral output, the total value of goods and services leaving the
industry. Wherever possible, the indexes of industry output are calculated with
a Tornqvist formula. This formula aggregates the growth rates of the various
industry outputs between two periods, using their relative shares in industry
value of production averaged over the two periods as weights. Industry output
measures for manufacturing industries are constructed using data from the
economic censuses and annual surveys of the Bureau of the Census, U.S.
Department of Commerce, together with information on price changes, primarily
from BLS.
Multifactor Productivity: The manufacturing multifactor productivity measures
describe the relationship between output in real terms and the inputs involved
in its production. Manufacturing multifactor productivity measures exclude
intermediate inputs between manufacturing establishments from both output and
inputs. They do not measure the specific contributions of labor, capital, or
intermediate inputs. Rather, they are designed to measure the joint influences
on economic growth of technological change, efficiency improvements, returns
to scale, reallocation of resources due to shifts in factor inputs across
industries, and other factors. The multifactor productivity indexes are
derived by dividing an output index by an index of the combined inputs of
labor, capital services, energy, non-energy materials, and purchased business
services.
Other information: Comprehensive tables containing more detailed data than
that which is published in this press release are available upon request at
202-691-5606 or at http://www.bls.gov/mfp/mprdload.htm. More detailed
information on methods, limitations, and data sources of capital and labor are
provided in BLS Bulletin 2178 (September 1983), Trends in Multifactor
Productivity, 1948-81 and on the BLS Multifactor Productivity website under
the title “Technical Information About the BLS Multifactor Productivity
Measures”for Major Sectors and 18 NAICS 3-digit Manufacturing Industries at
http://www.bls.gov/mfp/mprtech.pdf. Methods for measuring manufacturing
multifactor productivity are discussed in "Measurement of productivity growth
in U.S. manufacturing” in the July 1995 issue of the Monthly Labor Review.
See http://www.bls.gov/mfp/mprgul95.pdf.
Table 1. Manufacturing sector: productivity and related measures for the
1987-2009 period
Annual percent change from previous year
Productivity Inputs
Output Output Multi- Purc- Comb-
per per factor Sect- Cap- hased ined
hour unit Prod- oral ital busi- units
of all of uctiv out- Serv- Ene- Mater- ness of all
Year persons capital ity1 put Hours2 ices4 rgy ials services inputs3
1988 2.1 3.3 2.0 5.2 3.0 1.8 4.1 1.0 8.7 3.1
1989 1.0 -0.7 -0.5 1.6 0.6 2.4 -0.3 2.1 5.8 2.1
1990 2.2 -3.0 -0.7 -0.3 -2.5 2.7 1.9 1.7 1.5 0.4
1991 2.6 -3.9 -0.4 -1.7 -4.2 2.3 -0.3 -0.5 -0.8 -1.3
1992 3.8 1.0 -0.6 3.3 -0.5 2.2 -1.0 8.6 7.5 4.0
1993 2.6 1.5 2.6 3.9 1.3 2.4 3.4 0.8 0.8 1.3
1994 3.5 3.3 2.6 5.9 2.3 2.5 3.6 4.3 3.9 3.3
1995 4.5 1.7 1.8 5.2 0.7 3.5 2.9 5.4 4.9 3.4
1996 3.6 -0.6 0.3 3.4 -0.2 4.1 -2.7 9.0 -0.3 3.1
1997 5.4 2.8 2.7 7.3 1.8 4.5 -2.0 8.0 4.1 4.5
1998 5.6 0.7 1.3 5.3 -0.3 4.6 3.8 8.4 3.4 4.0
1999 4.9 0.4 1.2 4.2 -0.7 3.8 23.3 6.2 0.9 3.0
2000 4.4 0.2 3.6 3.1 -1.3 2.9 9.1 -1.9 -1.3 -0.5
2001 1.9 -6.2 -1.1 -4.8 -6.5 1.6 9.3 -6.3 -1.7 -3.7
2002 7.3 -1.3 3.2 -0.3 -7.1 1.0 -22.6 1.0 -3.2 -3.4
2003 6.2 0.6 3.6 1.0 -4.9 0.4 -10.7 -1.7 -0.6 -2.4
2004 2.3 2.1 3.7 1.7 -0.5 -0.3 -6.3 -0.8 -6.4 -1.9
2005 4.7 3.0 1.4 3.6 -1.1 0.6 10.1 1.5 8.9 2.1
2006 0.9 0.8 2.4 1.6 0.7 0.8 -7.8 -1.8 -1.6 -0.8
2007 3.9 0.7 0.8 2.2 -1.7 1.4 8.6 0.0 7.3 1.4
2008 -0.4 -7.0 -0.1 -4.4 -4.0 2.8 3.9 -5.0 -11.9 -4.3
2009 0.1 -13.6 -5.7 -12.5 -12.6 1.2 -11.4 -8.0 -5.3 -7.2
1. Output per unit of combined hours, capital services, energy, materials,
and purchased business services inputs.
2. Hours at work of all persons.
3. Combined units of hours, capital services, energy, materials, and
purchased business services, superlative chained index.
Source: Output data are from the Bureau of the Census, U.S. Department of
Commerce, and modified by the Bureau of Labor Statistics,
U.S. Department of Labor. Compensation and hours data are from
the Bureau of Labor Statistics. Capital measures are based on data
supplied by the Bureau of Economic Analysis.
See also Technical Notes in this release.
Table 2.Manufacturing sector: indexes of productivity and related
measures, 1987-2009
Indexes 2005=100
Productivity Inputs
Output Output Multi- Purc- Comb-
per per factor Sect- Cap- hased ined
hour unit Prod- oral ital busi- units
of all of uctiv out- Serv- Ene- Mater- ness of all
Year persons capital ity1 put Hours2 ices4 rgy ials services inputs3
1987 51.0 95.9 76.9 62.9 123.2 65.6 83.8 63.8 71.0 81.7
1988 52.1 99.1 78.5 66.1 126.9 66.8 87.3 64.4 77.2 84.2
1989 52.6 98.4 78.1 67.2 127.7 68.3 87.0 65.8 81.7 86.0
1990 53.8 95.4 77.5 67.0 124.5 70.2 88.6 66.9 82.9 86.4
1991 55.2 91.7 77.2 65.8 119.3 71.8 88.4 66.6 82.3 85.2
1992 57.3 92.7 76.8 68.0 118.7 73.4 87.5 72.3 88.4 88.6
1993 58.8 94.1 78.7 70.7 120.3 75.1 90.4 72.9 89.1 89.7
1994 60.8 97.2 80.8 74.9 123.1 77.0 93.7 76.0 92.6 92.7
1995 63.6 98.8 82.2 78.8 123.9 79.7 96.4 80.2 97.1 95.8
1996 65.9 98.2 82.4 81.5 123.6 83.0 93.8 87.4 96.8 98.8
1997 69.5 100.9 84.7 87.4 125.8 86.7 91.9 94.4 100.8 103.3
1998 73.4 101.6 85.8 92.1 125.5 90.7 95.4 102.4 104.2 107.3
1999 77.0 102.0 86.8 95.9 124.7 94.1 117.7 108.7 105.2 110.5
2000 80.4 102.1 89.9 98.9 123.1 96.8 128.4 106.7 103.8 110.0
2001 81.9 95.7 88.9 94.2 115.0 98.4 140.3 100.0 102.0 105.9
2002 87.9 94.5 91.8 93.9 106.9 99.3 108.6 101.0 98.7 102.3
2003 93.3 95.1 95.1 94.9 101.6 99.7 97.0 99.3 98.1 99.8
2004 95.5 97.1 98.6 96.5 101.1 99.4 90.8 98.5 91.8 97.9
2005 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0
2006 100.9 100.8 102.4 101.6 100.7 100.8 92.2 98.2 98.4 99.2
2007 104.9 101.6 103.2 103.8 99.0 102.2 100.1 98.3 105.6 100.6
2008 104.5 94.5 103.1 99.2 95.0 105.1 104.0 93.4 93.0 96.3
2009 104.5 81.6 97.2 86.8 83.0 106.4 92.2 85.9 88.1 89.3
1. Output per unit of combined hours, capital services, energy, materials,
and purchased business services inputs.
2. Hours at work of all persons.
3. Combined units of hours, capital services, energy, materials,
and purchased business services, superlative chained index.
Source: Output data are from the Bureau of the Census, U.S. Department of
Commerce, and modified by the Bureau of Labor Statistics,
U.S. Department of Labor. Compensation and hours data are from
the Bureau of Labor Statistics. Capital measures are based on data
supplied by the Bureau of Economic Analysis.
See also Technical Notes in this release.
Table 3. Multifactor productivity measures for manufacturing industries
in selected periods, 1987-2009
Compound annual growth rates
1987- 1987- 1990- 1995- 2000- 2007- 2008-
2009 1990 1995 2000 2007 2009 2009
Manufacturing 1.1 0.3 1.2 1.8 2.0 -3.0 -5.7
Nondurable
manufacturing 0.1 -0.5 0.7 -0.2 1.0 -2.7 -3.1
Food, beverage,
and tobacco products -0.2 -1.6 1.4 -1.7 0.8 -2.2 -1.4
Textile mills and
textile product mills 1.0 1.1 0.7 1.5 1.7 -2.3 -8.7
Apparel, leather,
and allied products 2.1 0.0 2.9 0.6 4.4 -0.8 -8.7
Paper products 0.1 -0.2 -0.1 0.5 0.7 -2.2 -1.3
Printing and related
support activities 0.3 1.0 -0.2 -0.5 1.3 -1.3 -4.1
Petroleum and coal
products 0.8 0.8 0.8 1.1 0.3 2.0 -1.7
Chemical products -0.4 -0.9 -0.7 -0.5 1.9 -6.4 -4.6
Plastics and
rubber products 0.3 0.8 0.5 1.2 0.5 -4.3 -3.6
Durable manufacturing 1.8 0.9 1.5 3.3 2.8 -3.0 -8.0
Wood products -0.5 1.0 -1.3 -0.3 0.9 -6.1 -12.8
Nonmetallic
mineral products -0.2 0.2 0.8 0.1 -0.7 -2.5 -4.5
Primary metals 0.0 1.0 0.0 0.3 -0.4 -1.3 -3.7
Fabricated metal
products -0.4 -0.1 1.0 -0.2 0.6 -8.4 -15.6
Machinery -0.3 1.0 -1.9 -1.2 1.2 -1.6 -2.9
Computer and
electronic products 9.7 5.5 9.3 14.4 9.8 5.1 2.4
Electrical equipment,
appliances, and
components -0.9 -2.4 -2.4 -2.6 1.4 1.4 -1.0
Transportation
equipment -0.2 -1.6 -0.5 0.5 1.7 -5.0 -11.6
Furniture and
related products -0.4 -0.7 0.6 0.6 1.1 -9.7 -12.2
Miscellaneous
manufacturing 1.6 2.6 -0.1 2.4 2.2 0.4 -0.9
Note: Multifactor productivity measures by industry do not sum up to aggregate
manufacturing measures because industry measures exclude transactions
only within the specific industry while the aggregate manufacturing
measures also exclude transactions between all manufacturing industries.
United States Department of Labor
