Technical note

                                         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 dipsweb@bls.gov. 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.