For release 10:00 a.m. (EDT) Tuesday, April 9, 2013 USDL- 13-0626
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MULTIFACTOR PRODUCTIVITY TRENDS - 2011
Private nonfarm business sector multifactor productivity increased at a 1.0
percent annual rate in 2011, the U.S. Bureau of Labor Statistics reported
today. (See chart 1, table A.) The multifactor productivity gain in 2011
reflected a 2.7 percent increase in output and 1.7 percent increase in the
combined inputs of capital and labor. Capital services grew by 0.8 percent,
and labor input – which is the combined effect of hours worked and labor
composition – grew 2.2 percent, the largest gain in the series since 2006.
This series began in 1987. (See table A, table 1.) Capital services per hour of
all persons fell 1.2 percent for the private nonfarm business sector. Prior
to 2011, this measure had increased each year with the exception of 1994,
when it was unchanged.
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 increased at a 0.7 percent
annual rate in 2011, reflecting a 2.4 percent increase in output and 1.7
percent increase in the combined inputs of capital and labor. The increase
in combined inputs of capital and labor was the largest since 2007.
(See table A, table 2.)
Historical trends in private nonfarm business
Multifactor productivity in private nonfarm business grew 0.9 percent annually
from 1987 to 2011. (See table A.) For the 2007-2011 period, multifactor
productivity grew 0.4 percent, due to a 0.1 percent decline in output coupled
with a 0.5 percent decline in combined inputs. In contrast, the 1.0 percent
increase in multifactor productivity in 2011 was a result of an increase in
output much larger than the increase in combined inputs. Output grew 2.7
percent over the year, while combined inputs grew 1.7 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. In particular, the contribution
of capital intensity to labor productivity growth became more pronounced
after 1995. (See chart 2, table B.)
For the 2007-2011 period, the contribution of capital intensity increased
at a 1.1 percent annual rate. Output per hour of all persons increased at
a 1.9 percent annual rate, close to the 2.2 percent annual rate seen during
the entire 1987-2011 period. This was due to multifactor productivity
increasing at a 0.4 percent annual rate from 2007 to 2011, slower than the
gains of 1.3 and 1.4 percent that occurred during the 1995-2000 and 2000-2007
periods, respectively. (See chart 2, table B.)
For the 2000-2007 period, information processing equipment and software
(IPES) grew 8.1 percent annually in the private nonfarm business sector.
(See table 5.) For the 2007-2011 period, IPES slowed to a 3.9 percent
annual rate. For both periods, the rate of IPES was markedly lower than
the 17.8 percent increase in the 1995-2000 period.
The revised multifactor productivity measure for the most recent year
is based on more recent source data than were available for the preliminary
multifactor productivity release published on May 9, 2012,
http://www.bls.gov/news.release/archives/prod3_05092012.pdf. Revisions
to underlying data affect multifactor productivity growth rates for the
2007-2011 period. (See table C.) In 2011, multifactor productivity growth
in the private nonfarm business sector was 1.0 percent, larger than the 0.5
percent increase previously reported, due to a 0.3 percentage point upward
revision to output and a 0.2 percentage point downward revision to combined
inputs. For 2010, multifactor productivity growth in the private nonfarm
business sector was 2.6 percent, a 0.9 percentage point downward
revision due to a downward revision to output.
Table A. Compound annual growth rates for productivity, output, and inputs
in the private nonfarm business and private business sectors for selected
periods,1987-2011
In percent
1987- 1987- 1990- 1995- 2000- 2007- 2010-
2011 1990 1995 2000 2007 2011 2011
Private nonfarm business1
Productivity
Multifactor Productivity2 0.9 0.5 0.5 1.3 1.4 0.4 1.0
Output per hour of all
persons 2.2 1.4 1.6 2.7 2.6 1.9 0.7
Output per unit of
capital services -0.7 -0.4 -0.4 -1.0 -0.5 -1.2 1.9
Output 2.8 3.2 2.9 5.0 2.7 -0.1 2.7
Inputs
Combined inputs3 1.9 2.7 2.4 3.6 1.3 -0.5 1.7
Labor input4 1.1 2.3 2.0 2.5 0.4 -1.3 2.2
Hours 0.6 1.7 1.3 2.2 0.1 -1.9 2.0
Labor Composition5 0.5 0.6 0.7 0.3 0.3 0.6 0.2
Capital services 3.5 3.6 3.3 6.0 3.2 1.1 0.8
Analytic ratio
Capital services per
hour of all persons 2.9 1.8 1.9 3.8 3.1 3.1 -1.2
Private business1
Productivity
Multifactor Productivity2 1.0 0.6 0.4 1.5 1.4 0.4 0.7
Output per hour of all
persons 2.2 1.6 1.5 2.9 2.7 1.8 0.4
Output per unit of
capital services -0.6 -0.3 -0.3 -0.8 -0.5 -1.1 1.4
Output 2.8 3.2 2.8 5.0 2.7 -0.1 2.4
Inputs
Combined inputs3 1.8 2.6 2.4 3.4 1.2 -0.5 1.7
Labor input4 1.1 2.1 2.0 2.4 0.3 -1.3 2.1
Hours 0.6 1.6 1.3 2.0 0.0 -1.9 2.0
Labor Composition5 0.5 0.6 0.7 0.3 0.3 0.6 0.1
Capital services 3.4 3.5 3.1 5.8 3.1 1.1 1.0
Analytic ratio
Capital services per
hour of all persons 2.8 1.9 1.8 3.7 3.1 3.0 -1.0
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, 1987-2011
In percent
1987- 1987- 1990- 1995- 2000- 2007- 2010-
2011 1990 1995 2000 2007 2011 2011
Private nonfarm business1
Output per hour
of all persons 2.2 1.4 1.6 2.7 2.6 1.9 0.7
Contribution of
capital intensity2 0.9 0.6 0.6 1.2 1.0 1.1 -0.4
Contribution of
information processing
equipment and software3 0.6 0.5 0.5 0.9 0.5 0.4 0.1
Contribution of all
other capital services 0.3 0.1 0.1 0.2 0.4 0.6 -0.5
Contribution of
labor composition4 0.3 0.4 0.5 0.2 0.2 0.4 0.1
Multifactor productivity5 0.9 0.5 0.5 1.3 1.4 0.4 1.0
Contribution of R&D to
multifactor productivity 0.2 0.2 0.2 0.2 0.2 0.2 0.1
Private business1
Output per hour
of all persons 2.2 1.6 1.5 2.9 2.7 1.8 0.4
Contribution of
capital intensity2 0.9 0.6 0.6 1.2 1.0 1.0 -0.4
Contribution of
information processing
equipment and software3 0.6 0.5 0.4 0.9 0.5 0.4 0.1
Contribution of all
other capital services 0.3 0.2 0.1 0.3 0.4 0.6 -0.4
Contribution of
labor composition4 0.3 0.4 0.5 0.2 0.2 0.4 0.1
Multifactor productivity5 1.0 0.6 0.4 1.5 1.4 0.4 0.7
1. Excludes government enterprises.
2. Capital services per hour multiplied by capital's share of current
dollar costs.
3. Information processing equipment and software per hour multiplied by
its share of current dollar costs.
4. Labor composition multiplied by labor's share of current dollar costs.
5. Output per combined units of labor input 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. Contribution of information processing equipment and all other
capital services may not sum to the contribution of capital intensity due
to independent rounding.
Table C. Annual growth rates of the previous and revised multifactor
productivity measures in the private nonfarm business and private
business sectors for the 1987-2011 period
Annual percent change from previous year
Private Nonfarm Business Private Business
Year Previous Revised Previous Revised
1988 1.0 1.0 0.8 0.8
1989 0.0 0.0 0.3 0.3
1990 0.4 0.4 0.6 0.6
1991 -1.0 -1.0 -1.0 -1.0
1992 2.3 2.3 2.6 2.6
1993 0.3 0.3 0.2 0.2
1994 0.7 0.7 0.7 0.7
1995 0.0 0.0 -0.3 -0.3
1996 1.4 1.4 1.7 1.7
1997 0.6 0.6 0.8 0.8
1998 1.5 1.5 1.5 1.5
1999 1.6 1.7 1.8 1.8
2000 1.6 1.6 1.7 1.7
2001 0.7 0.7 0.8 0.8
2002 2.4 2.4 2.4 2.4
2003 2.5 2.5 2.7 2.7
2004 2.4 2.4 2.4 2.4
2005 1.1 1.1 1.0 1.0
2006 0.4 0.4 0.5 0.4
2007 0.3 0.3 0.3 0.3
2008 -1.4 -1.4 -1.2 -1.2
2009 -1.0 -0.4 -0.8 -0.1
2010 3.5 2.6 3.4 2.5
2011 0.5 1.0 0.3 0.7
