Technical Note Labor Productivity The industry labor productivity measures describe the relationship between industry output and the labor time involved in its production. They show the changes from period to period in the amount of goods and services produced per hour. Although the labor productivity measures relate output to hours of employees or all persons in an industry, they do not measure the specific contribution of labor or any other factor of production. Rather, they reflect the joint effects of many influences, including changes in technology; capital investment; utilization of capacity, energy, and materials; the use of purchased services inputs, including contract employment services; the organization of production; managerial skill; and the characteristics and effort of the workforce. Long-term productivity trends tend to be more reliable indicators of the performance of an industry than are year-to-year changes. The annual changes in an industry’s output and use of labor may reflect cyclical changes in the economy as well as long-term trends. Output Industry output is measured as an annual-weighted index of the changes in the various products or services (in real terms) provided for sale outside the industry. Real industry output is usually derived by deflating nominal sales or values of production using BLS price indexes, but for some industries it is measured by physical quantities of output. Industry output measures are constructed primarily using data from the economic censuses and annual surveys of the U.S. Census Bureau, U.S. Department of Commerce, together with information on price changes primarily from BLS. The measures in this news release incorporate current data from the Census Bureau’s Monthly Wholesale Trade Survey (May 2009), Annual Wholesale Trade Report (February 2009), Annual Revision of the Monthly Retail and Food Services: Sales and Inventories (April 2009), and the Annual Retail Trade Survey (July 2009). Labor Hours The primary source of industry employment and hours data is the BLS Current Employment Statistics (CES) survey. The CES provides monthly data on the number of total and nonsupervisory worker jobs held by wage and salary workers in nonfarm establishments, as well as data on the average weekly hours of nonsupervisory workers in those establishments. Data from the Current Population Survey (CPS) are also used to supplement the CES data. The industry productivity program estimates the average weekly hours of supervisory workers for each industry using data from the CPS together with the CES data. Data from the CPS are also used to estimate the employment and hours of self-employed and unpaid family workers in each industry. Hours of all persons in an industry are treated as homogeneous and are directly aggregated. Unit Labor Costs Unit labor costs represent the cost of labor required to produce one unit of output. The unit labor cost indexes are computed by dividing an index of industry labor compensation by an index of real industry output. Unit labor costs also describe the relationship between compensation per hour and real output per hour (labor productivity). Increases in hourly compensation increase unit labor costs; increases in labor productivity offset compensation increases and lower unit labor costs. Compensation, defined as payroll plus supplemental payments, is a measure of the cost to the employer of securing the services of labor. Payroll includes salaries, wages, commissions, dismissal pay, bonuses, vacation and sick leave pay, and compensation in kind. Supplemental payments include legally required expenditures and payments for voluntary programs. The legally required portion consists primarily of Federal old age and survivors’ insurance, unemployment compensation, and workers’ compensation. Payments for voluntary programs include all programs not specifically required by legislation, such as the employer portion of private health insurance and pension plans. Revisions Output measures for wholesale trade industries have been revised to include the revenues of nonemployer firms as well as those of employer firms. Although small, the revision reflects a more complete accounting of the total sales of each industry, and makes the output measures for wholesale trade industries consistent with the output series for industries in retail trade and food services and drinking places, which include nonemployer revenues. Additional Information The measures in this news release replace the wholesale trade, retail trade, and food services and drinking places series published on the BLS website, in the news release Productivity and Costs by Industry: Wholesale Trade, Retail Trade, and Food and Drinking Places, 2007 (released August 21, 2008) and in table 50 of the Monthly Labor Review. The industries included in this release are classified according to the 2007 NAICS. All of the measures for 2008 in this release are preliminary and subject to revision. Industry productivity and related indexes and rates of change can be accessed online by visiting the Labor Productivity and Costs web site at http://www.bls.gov/lpc/. Data on industry employment, hours, labor compensation, value of production, and the implicit price deflator for output for these industries are available upon request by calling the Division of Industry Productivity Studies (202-691- 5618) or by sending a request by e-mail to email@example.com. While the rates of change reported by BLS in this news release are rounded to one decimal place, all industry productivity percent changes are calculated using index numbers to three decimal places. Information in this report will be made available to sensory-impaired individuals upon request. Voice phone: 202-691-5618; TDD message referral phone number: 1-800-877-8339.