Preliminary multifactor productivity trends, 2013

For release 10:00 am (EDT) Wednesday, July 9, 2014	USDL-14-1286
Technical information:	(202) 691-5606  •  mfpweb@bls.gov  •  www.bls.gov/mfp
Media contact:	        (202) 691-5902  •  PressOffice@bls.gov
 
PRELIMINARY MULTIFACTOR PRODUCTIVITY TRENDS – 2013

Private nonfarm business sector multifactor productivity increased at a 0.3
percent annual rate in 2013, the U.S. Bureau of Labor Statistics reported 
today. (See chart 1, table A.) The gain in multifactor productivity was the
smallest annual percent change since a 0.3-percent decline in 2009. The 
multifactor productivity increase in 2013 reflected a 2.3-percent increase 
in output and a 1.9-percent increase in the combined inputs of capital and 
labor. Capital services grew by 1.9 percent and labor input – which is the 
combined effect of hours worked and labor composition – also grew by 1.9 
percent. Capital services per hour of all persons slightly increased at a 
rate of 0.3 percent in 2013 after falling 0.8 percent in 2012 and 1.1 percent
in 2011. (See table 1.)

Multifactor productivity measures the change in output per unit of combined 
capital and labor input. It is designed to measure the joint influences of 
technological change, efficiency improvements, returns to scale, reallocation
of resources, and other factors on economic growth, allowing for the effects 
of capital and labor. Multifactor productivity, therefore, differs from labor
productivity (output per hour worked) measures that are published quarterly
by BLS. Multifactor productivity includes information on capital services, 
hours worked, and shifts in the composition of labor. Estimates of capital 
services and labor composition are not included in the quarterly labor 
productivity measures. Additionally, much of the source data needed to 
construct multifactor productivity measures are not available quarterly.

Private business sector multifactor productivity grew by 0.7 percent in 2013.
A 2.5-percent increase in output and a 1.8-percent increase in the combined 
inputs of capital and labor contributed to the multifactor productivity gain
in 2013. (See table 2.)
 
 
Historical trends in the private nonfarm business sector

Multifactor productivity in the private nonfarm business sector grew 0.9 
percent annually from 1987 to 2013. (See table A.) For the 2007-2013 period,
multifactor productivity grew 0.6 percent on average as combined inputs 
increased 0.4 percent and output increased 1.0 percent. The increase in 
combined inputs reflected a decrease in labor input of 0.1 percent combined
with a 1.4-percent increase in capital services. In contrast, the 0.9-percent
average annual percent change in multifactor productivity from 1987 to 2013
was a result of output growing 2.9 percent and combined inputs increasing 
2.0 percent. (See table 1.)

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. Output per hour shifted 
sharply upwards after the 1990-1995 period reflecting increases in 
contribution of capital intensity and multifactor productivity.

For the 2007-2013 period, the contribution of capital intensity and the 
contribution of labor composition amounted to 0.7 percent and 0.3 percent,
respectively. Additionally, the growth in multifactor productivity of 0.6 
percent contributed to an overall growth of output per hour of 1.7 percent.
This component of labor productivity growth more closely resembles the 
1990-1995 period, prior to the upward shift in multifactor productivity 
and capital intensity. (See chart 2, table B.) 

In 2013, the contribution of capital intensity in the private nonfarm business
sector increased 0.1 percent. Combined with a modest 0.2-percent increase in
the contribution of labor composition and a 0.3-percent increase in multifactor
productivity, output per hour of all persons increased at a 0.6 percent annual
rate. Labor productivity growth was much smaller than the average increase of
2.1 percent over the duration of the series, from 1987 to 2013. (See table B.)

The methodology for measuring preliminary multifactor productivity for 2013 is
a simplified version of the methodology that BLS uses when more detailed data
are available. Measures will be revised in early 2015. 
 
Table A.  Compound average growth rates for productivity, output, and inputs
in the private nonfarm business and private business sectors for selected
periods,1987-2013

In percent


                            1987-  1987-  1990-  1995-  2000-  2007-  2012-
                            2013   1990   1995   2000   2007   2013   2013

Private nonfarm business1

Productivity
  Multifactor Productivity2  0.9    0.5    0.5    1.4    1.4    0.6    0.3
    Output per hour of all
      persons                2.1    1.5    1.6    2.8    2.7    1.7    0.6
    Output per unit of
      capital services      -0.5   -0.5   -0.4   -0.9   -0.5   -0.3    0.3


Output                       2.9    3.3    3.0    5.1    2.8    1.0    2.3


Inputs

  Combined inputs3           2.0    2.8    2.5    3.6    1.4    0.4    1.9
   Labor input4              1.2    2.3    2.0    2.5    0.4   -0.1    1.9
     Hours                   0.7    1.7    1.3    2.2    0.1   -0.6    1.6
     Labor Composition5      0.5    0.6    0.7    0.3    0.3    0.5    0.3
   Capital services          3.4    3.8    3.4    6.0    3.3    1.4    1.9

Analytic ratio
  Capital services per
    hour of all persons      2.7    2.0    2.1    3.7    3.2    2.0    0.3


Private business1

Productivity
  Multifactor Productivity2  1.0    0.6    0.5    1.6    1.4    0.7    0.7
    Output per hour of all
      persons                2.2    1.7    1.6    3.0    2.7    1.7    1.0
    Output per unit of
      capital services      -0.4   -0.5   -0.3   -0.6   -0.5   -0.3    0.7


Output                       2.9    3.3    2.9    5.1    2.8    1.1    2.5


Inputs

  Combined inputs3           1.9    2.7    2.5    3.5    1.3    0.4    1.8
   Labor input4              1.2    2.1    2.1    2.4    0.4   -0.1    1.8
     Hours                   0.7    1.6    1.4    2.0    0.0   -0.6    1.5
     Labor Composition5      0.5    0.6    0.7    0.3    0.3    0.5    0.3
   Capital services          3.4    3.8    3.3    5.8    3.3    1.4    1.9

Analytic ratio
  Capital services per
    hour of all persons      2.6    2.1    1.9    3.7    3.2    2.0    0.4


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


Table B.  Compound annual growth rates in output per hour of all persons 
and the contributions of capital intensity, labor composition, and 
multifactor productivity in the private nonfarm business and private 
business sectors for selected periods, 1987-2013

In percent



                            1987-  1987-  1990-  1995-  2000-  2007-  2012-
                            2013   1990   1995   2000   2007   2013   2013

Private nonfarm business1

Output per hour
of all persons               2.1    1.5    1.6    2.8    2.7    1.7    0.6

Contribution of
capital intensity2           0.9    0.7    0.7    1.2    1.0    0.7    0.1

Contribution of
labor composition3           0.3    0.4    0.5    0.2    0.2    0.3    0.2

Multifactor productivity4    0.9    0.5    0.5    1.4    1.4    0.6    0.3

  Contribution of R&D to
  multifactor productivity


Private business1

Output per hour
of all persons               2.2    1.7    1.6    3.0    2.7    1.7    1.0

Contribution of
capital intensity2           0.9    0.7    0.6    1.2    1.1    0.7    0.1

Contribution of
labor composition3           0.3    0.4    0.5    0.2    0.2    0.3    0.2

Multifactor productivity4    1.0    0.6    0.5    1.6    1.4    0.7    0.7

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

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: July 09, 2014