Productivity and Costs, Third Quarter 2004, Preliminary

USDL 04-2259                                     
TRANSMISSION OF THIS
MATERIAL IS EMBARGOED
UNTIL 8:30 A.M. EST,
THURSDAY, NOVEMBER 4, 2004

Internet address:        http://www.bls.gov/lpc/
Historical, technical             
  information: 		(202) 691-5606         
Current data:  		(202) 691-5200         
Media contact: 		(202) 691-5902         




                           PRODUCTIVITY AND COSTS
                       Third Quarter 2004, preliminary


     The Bureau of Labor Statistics of the U.S. Department of Labor today
reported preliminary productivity data--as measured by output per hour of all
persons--for the third quarter of 2004.  The preliminary seasonally-adjusted
annual rates of productivity growth in the third quarter were:

               2.3 percent in the business sector and
               1.9 percent in the nonfarm business sector.

Productivity increased 2.3 percent in the business sector, as output grew 4.2
percent and hours increased 1.9 percent.  The 1.9-percent rise in nonfarm
business productivity occurred as output rose 4.1 percent and hours rose 2.1
percent (table A).

     In manufacturing, productivity increases in the third quarter were:

               4.3 percent in manufacturing,
               5.0 percent in durable goods manufacturing, and
               4.3 percent in nondurable goods manufacturing.

The third-quarter increase in manufacturing productivity is much lower than
the 8.3-percent rise reported for the previous quarter (as revised).  Output
and hours in manufacturing, which includes about 13 percent of U.S. business
sector employment, tend to vary more from quarter to quarter than data for
the aggregate business and nonfarm business sectors.  Third-quarter measures
are summarized in table A and appear in detail in tables 1 through 5.

     The data sources and methods used in the preparation of the
manufacturing series differ from those used in preparing the business and
nonfarm business series, and these measures are not directly comparable.
Output measures for business and nonfarm business are based on measures of
gross domestic product prepared by the Bureau of Economic Analysis of the
U.S. Department of Commerce.  Quarterly output measures for manufacturing
reflect indexes of industrial production independently prepared by the Board
of Governors of the Federal Reserve System.  See Technical Notes for further
information on data sources.

------------------------------------------------------------------------------
Table A. Productivity and costs: Preliminary third-quarter 2004 measures
(Seasonally adjusted annual rates)
------------------------------------------------------------------------------                                                            
                                                           Real       
                                                Hourly     hourly     Unit
                   Produc-                      compen-    compen-    labor
  Sector           tivity     Output    Hours   sation     sation     costs
------------------------------------------------------------------------------                   
                      Percent change from preceding quarter
                      
 Business           2.3        4.2       1.9      3.8       2.0        1.5
 Nonfarm business   1.9        4.1       2.1      3.6       1.7        1.6
 Manufacturing      4.3        4.0      -0.3      4.4       2.5        0.1
   Durable          5.0        6.3       1.3      3.9       2.0       -1.0
   Nondurable       4.3        1.3      -2.8      5.1       3.2        0.8
------------------------------------------------------------------------------   
                      Percent change from same quarter a year ago
                      
 Business           2.9        4.4       1.5      3.7        1.0       0.9
 Nonfarm business   3.1        4.7       1.5      3.7        1.0       0.6
 Manufacturing      4.6        5.8       1.1      2.4       -0.3      -2.1
   Durable          5.2        8.0       2.6      1.5       -1.2      -3.5
   Nondurable       4.5        3.1      -1.3      3.7        1.0      -0.7
------------------------------------------------------------------------------

Business

     From the second quarter to the third quarter of 2004, productivity in
the business sector grew at a 2.3 percent seasonally adjusted annual rate.
Output increased 4.2 percent, while hours of all persons engaged in the
sector increased 1.9 percent.  After revisions, productivity in the business
sector rose 2.9 percent in the second quarter of 2004, reflecting a 3.9-
percent rise in output and a 1.0-percent rise in hours (tables B and 1).
     
     Hourly compensation in the business sector increased at an annual rate
of 3.8 percent during the third quarter of 2004, more slowly than the 4.3-
percent rise one quarter earlier (revised). This measure includes wages and
salaries, supplements, employer contributions to employee benefit plans, and
taxes.  Real hourly compensation, which takes into account changes in
consumer prices, grew by 2.0 percent in the third quarter of 2004 after
falling by 0.4 percent in the second quarter and 0.8 percent in the first
quarter of the year.

     Unit labor costs, which reflect changes in both hourly compensation and
productivity, rose 1.5 percent during the third quarter, about the same rate
of increase as the 1.4-percent growth in the second quarter.  The implicit
price deflator for the business sector increased 0.9 percent during the third
quarter of 2004, following a 3.3 percent increase in the previous quarter.

Nonfarm business

     Productivity in the nonfarm business sector grew at a 1.9-percent annual
rate during the third quarter of 2004.  Output grew 4.1 percent in the third
quarter and hours worked in the nonfarm business sector rose 2.1 percent,
reflecting a 1.7-percent gain in employment and a 0.4-percent increase in
average weekly hours at work.  Nonfarm business productivity increased 3.9
percent in the second quarter of 2004 (revised), as output grew 4.2 percent
and hours rose by 0.3 percent (table 2).

     Hourly compensation increased at a 3.6 percent annual rate in the third
quarter of 2004. When the rise in consumer prices is taken into account, real
hourly compensation rose 1.7 percent during the July-September period.
During the second quarter of 2004, real hourly compensation had risen 0.2
percent.
     
     Unit labor costs grew 1.6 percent during the third quarter of 2004.  In
the second quarter, unit labor costs in the nonfarm business sector had risen
1.0 percent.  The implicit price deflator for nonfarm business output rose
1.6 percent in the third quarter of 2004.

Manufacturing

     Productivity increased 4.3 percent in manufacturing in the third quarter
of 2004, as output grew 4.0 percent and hours of all persons fell 0.3 percent
(seasonally adjusted annual rates).  In durable goods, productivity grew 5.0
percent in the third quarter as output increased 6.3 percent and hours of all
persons rose 1.3 percent.  Productivity increased 4.3 percent in nondurable
goods, as a modest output increase of 1.3 percent was combined with a decline
of 2.8 percent in hours of all persons (tables 3, 4, and 5).

     The hourly compensation of manufacturing workers increased an average of
4.4 percent during the third quarter of 2004, reflecting increases of 3.9
percent in durable goods and 5.1 percent in nondurable goods.  When the
increase in consumer prices is taken into account, real hourly compensation
in total manufacturing rose 2.5 percent in the third quarter.  Real hourly
compensation had fallen in both of the previous quarters, 0.9 percent in the
second quarter (as revised) and 7.4 percent in the first quarter.

     Unit labor costs in manufacturing edged up by 0.1 percent in the third
quarter of 2004, after falling in three of the previous four quarters.  In
the durable goods sector, unit labor costs in the third quarter fell 1.0
percent in the third quarter and in the nondurable goods sector, these costs
rose 0.8 percent.


Revised Measures

     Current and previous measures for the first and second quarters of 2004
for the business, nonfarm business, and manufacturing sectors are compared in
table B.  Hours data for the second quarter now reflect more current data on
the ratio of hours worked to hours paid and updated information on the
relative average weekly hours of supervisory (nonproduction) workers to
nonsupervisory (production) workers in private nonfarm businesses.

------------------------------------------------------------------------------
Table B. Previous and revised productivity and related measures
Quarterly percent change at seasonally adjusted annual rate
------------------------------------------------------------------------------                                                          
                                                      Real      
                                             Hourly   hourly     Unit
                   Produc-                   compen-  compen-    labor
Sector             tivity   Output   Hours   sation   sation     costs
------------------------------------------------------------------------------                                                                
                             Second quarter 2004
Business:                                                       
  Previous          1.5       3.2     1.6      3.7     -1.0       2.1
  Current           2.9       3.9     1.0      4.3     -0.4       1.4
  
Nonfarm business:                                               
  Previous          2.5       3.5     1.0      4.3     -0.4       1.8
  Current           3.9       4.2     0.3      4.9      0.2       1.0
  
Manufacturing:                                                  
  Previous          6.9       6.2    -0.6      3.2     -1.5      -3.5
  Current           8.3       6.7    -1.4      3.8     -0.9      -4.2
------------------------------------------------------------------------------     
     
     In the business and nonfarm business sectors, productivity grew more
rapidly than reported on Sept. 2, based on information then available.  In
both sectors, the growth in output was revised up and the growth in hours was
revised down.  Hourly compensation was revised up in both sectors.  Unit
labor costs rose much less than reported earlier.  Productivity also was
revised up in the manufacturing sector, reflecting faster growth in output
and a larger decline in hours than previously reported.  Hourly compensation
rose more rapidly in the second quarter than reported earlier.  Because
productivity was revised up more than hourly compensation, unit labor costs
in manufacturing show more of a decline in the second quarter than reported
on Sept. 2.
     
     On Oct. 13, 2004, a notice regarding corrections to the data released on
Sept. 2 was posted on the BLS web site.  Data for the second quarter 2004 for
business, nonfarm business, manufacturing, and nonfinancial corporations were
not affected.  The Productivity and Costs news release of Aug. 10, 2004,
which included revisions to historical measures, also contained some
incorrect data.  For more information, see www.bls.gov/lpc/note09022004.htm


Revised measures: Nonfinancial Corporations
     
     Productivity and cost measures for nonfinancial corporations for the
second quarter of 2004 also were revised to incorporate more recent
information than was available on Sept. 2.

------------------------------------------------------------------------------
Table C.  Nonfinancial corporations: Previous and revised productivity and
cost measures
Quarterly percent changes at seasonally adjusted annual rates
------------------------------------------------------------------------------                                                           
                                             Real                    
                                    Hourly   hourly  Unit            Implicit
            Produc-                 compen-  compen- labor  Unit     price
            tivity   Output  Hours  sation   sation  costs  profits  deflator
------------------------------------------------------------------------------                                                                     
                            Second quarter 2004
                            
Previous     1.4      3.2     1.8    4.0     -0.7     2.6    16.6     3.7
Current      2.7      3.7     0.9    4.7      0.0     1.9    21.7     3.8
------------------------------------------------------------------------------     
     
     Productivity grew at an annual rate of 2.7 percent in second-quarter
2004, compared with the increase of 1.4 percent published Sept. 2.  This was
the combined result of both an upward revision in output growth, from 3.2
percent to 3.7 percent, and a downward revision to hours growth, from 1.8 to
0.9 percent.  Hourly compensation was revised up.  However, the upward
revision to productivity more than offset the upward revision to hourly
compensation, and unit labor costs grew more slowly than reported previously.
Unit profits also grew more rapidly than reported on Sept. 2. (tables C and
6).
                                      
                               Upcoming change

     Early in 2005, BLS will improve the way it uses data for farm workers,
the nonfarm self employed, and nonfarm unpaid family workers in the
productivity program by accounting for the effects of multiple jobholding.

                              Next release date
     
     The next release of Productivity and Costs is scheduled for 8:30 AM EST,
Tuesday, Dec. 7, 2004.  It will present third-quarter measures for
nonfinancial corporations and revised third-quarter measures for business,
nonfarm business, and manufacturing.