Last Modified Date: October 30, 2020
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.
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.
Output measures for some mining and utilities industries are based on physical
quantity data from the Energy Information Administration, U.S. Department of
Energy, while output measures for some transportation industries are based on
physical quantity data from the Bureau of Transportation Statistics, U.S.
Department of Transportation. Other data sources for some industries include the
U.S. Geological Survey, U.S. Department of the Interior; the U.S. Postal
Service; the Federal Deposit Insurance Corporation; and the Postal Rate
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. CES data are supplemented or
further disaggregated for some industries using data from the BLS Quarterly
Census of Employment and Wages (QCEW), the Bureau of the Census, or other
sources. 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. Other sources of employment and hours data for some service
industries include the American Association of Railroads, the U.S. Department of
Transportation, and the U.S. Postal Service. Hours of all workers in an industry
are treated as homogeneous and are directly aggregated.
Unit Labor Costs
Unit labor costs represent the cost of labor input 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.