Multifactor productivity trends, 2015

For release 10:00 am (EDT) Thursday, May 5, 2016	USDL-16-0881
Technical information:	(202) 691-5606  •  mfpweb@bls.gov  •  www.bls.gov/mfp
Media contact:	        (202) 691-5902  •  PressOffice@bls.gov 
PRELIMINARY MULTIFACTOR PRODUCTIVITY TRENDS – 2015

Private nonfarm business sector multifactor productivity increased at a
0.2-percent annual rate in 2015, the U.S. Bureau of Labor Statistics 
reported today. (See chart 1, table A.) This 2015 gain reflected a 
2.8-percent increase in output and a 2.6-percent increase in the combined
inputs of capital and labor. Capital services grew by 2.6 percent and 
labor input–which is the combined effect of hours worked and labor 
composition–also grew by 2.6 percent. Capital intensity, defined as 
capital services per hour, increased at a 0.4-percent annual rate in 
2015, which is the first increase in this measure since 2010. 
(See table 1.)

Multifactor productivity is calculated by dividing an index of real 
output by an index of combined units of labor input and capital services.
It is designed to measure the joint influences of technological change, 
efficiency improvements, returns to scale, reallocation of resources, 
and other factors of economic growth, accounting for the effects of 
capital and labor. Multifactor productivity annual measures differ from 
BLS quarterly labor productivity (output per hour worked) measures because
the former also includes the influences of capital services and shifts in
the composition of the workforce. Additionally, much of the source data 
needed to construct multifactor productivity measures are not available 
on a quarterly basis.

Private business sector multifactor productivity increased at a 0.2-percent
annual rate in 2015. A 2.9-percent increase in output and a 2.7-percent 
increase in the combined inputs of capital and labor contributed to the
multifactor productivity gain in 2015. (See table 2, table A.)
 
Historical trends in the private nonfarm business sector

Multifactor productivity in the private nonfarm business sector grew 0.9 
percent annually from 1987 to 2015. For the 2007-2015 period, multifactor
productivity grew 0.4 percent on average as combined inputs increased 0.9 
percent and output increased 1.3 percent. The increase in combined inputs 
reflected an increase in labor input of 0.6 percent along with a 1.6-percent
increase in capital services. (See table A.)

In the recent 2007-2015 period, annual labor productivity has slowed 
significantly to 1.2 percent, as compared to the 1995-2000 and 2000-2007
periods. Annual labor productivity growth can be viewed as the sum of three
components: multifactor productivity growth, the contribution of capital 
intensity, and the contribution of shifts in labor composition. For the 
2007-2015 period, labor productivity growth slowed due to multifactor 
productivity and the contribution of capital intensity falling below 
pre-1995 levels. (See chart 2.)

For the 2007-2015 period, the contribution of capital intensity and the 
contribution of labor composition amounted to 0.5 percent and 0.3
percent of private nonfarm business sector labor productivity growth, 
respectively. Additionally, the growth in multifactor productivity of 
0.4 percent contributed to an overall growth in output per hour of 1.2
percent. The contributions to labor composition slightly increased to 
0.3 percent, while multifactor productivity and the contribution of 
capital intensity greatly decelerated. (See chart 2, table B.) 

The methodology for measuring preliminary multifactor productivity for
2015 is a simplified version of the methodology that BLS uses when 
more detailed data are available. Measures will be revised early in 
the next calendar year. 

Table A.   Productivity, output, and inputs in the private nonfarm business
and private business sectors for selected periods,1987-2015

Compound annual growth rates


                            1987-  1987-  1990-  1995-  2000-  2007-  2014-
                            2015   1990   1995   2000   2007   2015   2015

Private nonfarm business1

Productivity
  Multifactor Productivity2  0.9    0.7    0.5    1.5    1.4    0.4    0.2
  Labor productivity3        2.0    1.6    1.6    2.9    2.6    1.2    0.6
  Output per unit of
    capital services        -0.4   -0.5   -0.3   -0.8   -0.4   -0.2    0.2


Output                       2.9    3.3    3.0    5.0    2.8    1.3    2.8


Inputs

  Combined inputs5           2.0    2.6    2.4    3.5    1.4    0.9    2.6
   Labor input6              1.3    2.0    2.0    2.4    0.6    0.6    2.6
     Hours                   0.9    1.7    1.3    2.1    0.2    0.2    2.2
     Labor Composition7      0.4    0.3    0.7    0.3    0.4    0.4    0.5
   Capital services          3.3    3.8    3.3    5.9    3.2    1.6    2.6

Analytic ratio
   Capital intensity8        2.4    2.0    2.0    3.7    3.0    1.4    0.4


Private business1

Productivity
  Multifactor Productivity2  0.9    0.8    0.5    1.6    1.4    0.4    0.2
  Labor productivity3        2.0    1.7    1.6    3.0    2.7    1.2    0.5
  Output per unit of
    capital services        -0.3   -0.4   -0.2   -0.6   -0.4   -0.2    0.3


Output                       2.9    3.3    2.9    5.1    2.8    1.4    2.9


Inputs

  Combined inputs5           1.9    2.5    2.4    3.4    1.4    1.0    2.7
   Labor input6              1.3    1.9    2.1    2.3    0.5    0.6    2.8
     Hours                   0.8    1.5    1.4    2.0    0.1    0.2    2.3
     Labor Composition7      0.4    0.3    0.7    0.3    0.4    0.4    0.5
   Capital services          3.2    3.7    3.2    5.7    3.2    1.6    2.6

Analytic ratio
   Capital intensity8        2.3    2.1    1.8    3.7    3.0    1.4    0.2


1.  Excludes government enterprises.
2.  Output per combined units of labor input and capital services.
3.  Output per hour worked.
4.  The growth rate of each input is weighted by its share of current dollar
    costs.
5.  Hours at work by age, education, and gender group are weighted by each
    group’s share of the total wage bill.
6.  Ratio of labor input to hours.
7.  Capital services per hour.

Table B.  Labor productivity and the contributions of capital intensity, 
labor composition, and multifactor productivity to labor productivity in the
private nonfarm business and private business sectors for selected periods,
1987-2015

Compound annual growth rates



                            1987-  1987-  1990-  1995-  2000-  2007-  2014-
                            2015   1990   1995   2000   2007   2015   2015

Private nonfarm business1

Labor productivity2          2.0    1.6    1.6    2.9    2.6    1.2    0.6

Contribution of
capital intensity3           0.8    0.7    0.6    1.2    1.0    0.5    0.1

Contribution of
labor composition4           0.3    0.2    0.5    0.2    0.2    0.3    0.3

Multifactor productivity5    0.9    0.7    0.5    1.5    1.4    0.4    0.2

  Contribution of R&D to
  multifactor productivity


Private business1

Labor productivity2          2.0    1.7    1.6    3.0    2.7    1.2    0.5

Contribution of
capital intensity3           0.8    0.7    0.6    1.2    1.0    0.5    0.1

Contribution of
labor composition4           0.3    0.2    0.5    0.2    0.2    0.3    0.3

Multifactor productivity5    0.9    0.8    0.5    1.6    1.4    0.4    0.2

1. Excludes government enterprises.
2. Output per hour worked.
3. Capital services per hour multiplied by capital's share of current
   dollar costs.
4. Labor composition multiplied by labor's share of current dollar costs.
5. Output per unit of combined labor and capital services.

Note: Multifactor productivity plus contribution of capital intensity and
labor composition may not sum to output per hour due to independent
rounding.

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Last Modified Date: May 05, 2016