Washington, DC…Nonfarm business sector labor productivity increased at a 2.6 percent annual rate during the fourth quarter of 2010, the U.S. Bureau of Labor Statistics reported today. The gain in productivity reflects a 4.0 percent  increase in output and a 1.4 percent increase in hours worked.  (All quarterly percent changes in this release are seasonally adjusted annual  rates.) From the fourth quarter of 2009 to the fourth quarter of 2010, productivity increased 1.9 percent as output rose faster than hours…

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Labor productivity, or output per hour, is calculated by dividing an index
of real output by an index of hours of all persons, including employees,
proprietors, and unpaid family workers. The measures released today were
based on more recent source data than were available for the preliminary
report.

Unit labor costs in nonfarm businesses fell 0.6 percent in the fourth
quarter of 2010, due to productivity increasing faster than hourly
compensation. Unit labor costs edged down 0.1 percent from the same
quarter a year ago (table A). The annual average index of unit labor costs
declined 1.5 percent from 2009 to 2010 (table C).

BLS defines unit labor costs as the ratio of hourly compensation to labor
productivity; increases in hourly compensation tend to increase unit labor
costs and increases in output per hour tend to reduce them.

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Data in this release reflect the annual benchmark revision of BLS Current
Employment Statistics program data on nonfarm employee hours, and revised
seasonal adjustment of those data. More detail can be found in tables 1
through 6 and appendix tables 1 through 6. See Revised measures.
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Manufacturing sector productivity rose 5.9 percent in the fourth quarter
of 2010, as output increased 4.4 percent and hours decreased 1.4 percent.
Over the last four quarters, manufacturing productivity increased 4.2
percent as output increased faster than hours worked (table A). Unit labor
costs in manufacturing declined at a 2.7 percent annual rate in the fourth
quarter of 2010 and decreased by 2.7 percent over the last four quarters
(table A). Annual average productivity grew 6.7 percent from 2009 to 2010
(table C).

The data sources and methods used in the preparation of the manufacturing
output series differ from those used in preparing the business and nonfarm
business output series, and these measures are not directly comparable.
See Technical Notes for further information on data sources.

Revised measures

Quarterly and annual measures for all sectors were revised back to 2006 to
incorporate the annual benchmark adjustment and updated information on
seasonal trends from the BLS nonfarm payroll series. Revised and previous
measures for the third and fourth quarters of 2010 are shown in table B
for the business, nonfarm business and manufacturing sectors. Revised
third quarter measures for the nonfinancial corporate sector are shown in
table D. Quarterly and annual data for all sectors appear in tables 1-6
for 2008 through 2010, and in appendix tables 1-6 for 2006 and 2007. Full
historical annual and quarterly measures can be found on the labor
productivity and costs home page http://www.bls.gov/lpc/#data.

In the fourth quarter of 2010, changes in nonfarm business productivity
and unit labor costs were unrevised; underlying output and hours growth
were both revised downward. In manufacturing, productivity was revised up
to 5.9 percent reflecting an upward revision to output and a smaller
decline in hours than previously reported (table B).

In the third quarter of 2010, nonfarm business productivity growth was
revised down to 2.3 percent; unit labor costs rose 0.1 percent rather than
declining 0.1 percent as reported February 3. In manufacturing,
productivity growth was revised down slightly to 1.3 percent. An upward
revision in unit labor costs to 1.1 percent was due primarily to an upward
revision to hourly compensation (table B). In the nonfinancial corporate
sector productivity fell less than previously reported, the result of an
upward revision in output (table D).

Annual Average measures of hours, hourly compensation, and productivity
were revised for 2009 and 2010, as a result of the benchmark adjustment
(table C). Downward revisions to hours in nonfarm business and
manufacturing in both years contributed to annual productivity growth of
3.9 percent and 6.7 percent respectively for 2010, and 3.7 percent and 2.4
percent for 2009.