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Economic News Release
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Preliminary Multifactor Productivity Trends, 2008

Internet address:http://www.bls.gov/mfp	 USDL 09-0480
Historical, technical		         For Release: 10:00 AM EDT
information:	(202) 691-5606	         Wednesday, May 6, 2009
Media contact:	(202) 691-5902	
		


PRELIMINARY MULTIFACTOR PRODUCTIVITY TRENDS, 2008

Private Business Sector and Private Nonfarm Business Sector

Multifactor productivity, defined as output per combined units of labor and 
capital inputs, grew at an annual rate of 1.2 percent in the private 
business sector and 1.1 percent in the private nonfarm business sector 
for 2008, the Bureau of Labor Statistics (BLS) and the U.S. Department of
Labor reported today.
                            			2007-08
Private business sector	                          1.2
Private nonfarm business sector	                  1.1

The estimates of multifactor productivity in the private business and in 
the private nonfarm business sectors for 2008 both show the largest annual
rates of growth since 2005.  The 2007-08 annual changes are summarized in 
tables A and B.  Table B also presents data showing historical trends. 


//PROD3 ZUNI3PO QCT Test 10302020//

Multifactor productivity is designed to measure the joint influences of 
technological change, efficiency improvements, returns to scale, reallocation
of resources, and other factors on economic growth while allowing for the 
effects of capital and labor.  Multifactor productivity, therefore, differs 
from the labor productivity (output per hour worked) measures that are 
published quarterly by BLS since it includes information on capital services
and other data that are not available on a quarterly basis.   Additionally,
multifactor productivity measures for the private business and private
nonfarm business sectors account for shifts in the composition of labor.  
Estimates of labor composition are not included in the quarterly labor
productivity measures.

In private business and private nonfarm business, the change in multifactor 
productivity reflects the difference between the change in real gross domestic
product for the sector and the change in labor and capital inputs engaged 
in the production of this output.  The output measures for private business
and private nonfarm business are similar to the indexes of output for business 
and nonfarm business used in the quarterly labor productivity measures 
differing only in that the output of government enterprises is omitted.

A change in multifactor productivity reflects the change in output that cannot
be accounted for by the change in combined inputs of labor and capital. 
In contrast, a change in labor productivity reflects the change in output 
that cannot be accounted for by a single factor--the change in hours of all
persons engaged in production.

Table A.  Productivity and related data, percent changes 2007-08


					   Private Business1   Private Nonfarm 
                                                                  Business1
Productivity		
    Multifactor productivity2	                  1.2	              1.1
    Output per hour of all persons	          2.7	              2.8
    Output per unit of capital services	         -2.1	             -2.0
		
Output	                                          0.8	              0.8
		
Inputs		
    Labor input3	                         -1.9	             -1.8
        Hours	                                 -1.9	             -2.0
        Labor composition4	                 -0.1	              0.1
    Capital services	                          2.9	              3.0
    Combined units of labor and capital inputs5	 -0.3	             -0.3
		
Analytic ratio:		
    Capital services per hour of all persons	  4.9	              5.0

1 Excludes government enterprises.
2 Output per unit of combined labor and capital inputs.
3 Index of hours at work; hours at work by education and experience group are
  weighted by each group’s share of labor compensation.
4 Ratio of labor input to hours.
5 Labor input index combined with capital service input index, weighted by 
  labor's and capital's shares of nominal output.



Private business sector

Chart 1 shows the annual indexes of multifactor productivity, output per hour
worked, and output per unit of capital services during the 1987-2008 period 
for the private business sector.  Over the last 21 years, capital services
have grown more rapidly than hours in private business, and the skills of 
workers -- as measured by their age and education, which implicitly measure 
their work experience -- also have risen over this period.  These shifts
toward more capital intensive production and toward workers with more human 
capital have supplemented labor productivity growth, usually allowing output
per hour to grow at a faster rate than multifactor productivity.

Multifactor productivity rose 1.2 percent for the private business sector in
2008 (see table A).   The multifactor productivity gain in 2008 reflected a 
0.8-percent increase in output and a 0.3-percent decrease in the combined 
inputs of capital and labor.

Capital services grew 2.9 percent.  Labor input posted a decrease of 1.9 
percent, as both hours worked and labor composition fell.  Labor input 
reflects the change in hours at work adjusted for the effects of changing 
labor composition.  The decrease of labor input was due mostly to a 
decrease in hours at work of 1.9 percent and a decrease in labor composition
of 0.1 percent.  The capital-labor ratio 
(capital services per hour of all persons) increased by 4.9 percent.

Labor productivity (output per hour worked) increased 2.7 percent.  Capital
productivity (output per unit of capital services) fell 2.1 percent.  As
shown in table B, the contribution of labor composition was unchanged from 
2007 to 2008, while the contribution of capital intensity growth gained
1.6 percent over the same period. 

Historical trends in labor productivity growth can be viewed as the sum of
three components: multifactor productivity growth, the contribution of 
increased capital intensity, and the contribution of shifts in labor 
composition.  Chart 2 clearly shows the major changes in the relative 
contributions of multifactor productivity and of capital intensity in the 
latter half of the 1990s.  These contributions have continued to be relatively 
high for the 2000-2007 period and for 2007-2008.

Private nonfarm business sector

Multifactor productivity rose 1.1 percent for the private nonfarm business 
sector in 2008 (see table A).   The multifactor productivity gain in 2008 
reflected a 0.8-percent increase in output and a 0.3-percent decrease in 
the combined inputs of capital and labor.

Capital services grew 3.0 percent.  Labor input posted a decrease of 1.8 
percent, as hours worked declined and labor composition rose slightly.  The 
decrease of labor input was due to a decrease of 2.0 percent in hours at work
and an increase of 0.1 percent in labor composition.  The capital-labor ratio 
(capital services per hour of all persons) increased by 5.0 percent.

Labor productivity (output per hour worked) increased 2.8 percent.  Capital 
productivity (output per unit of capital services) fell 2.0 percent.  The
contribution of labor composition rose 0.1 percent, while the contribution 
of capital intensity growth gained 1.6 percentage points from the previous 
period (see table B). 



Table B.  Compound average annual rates of growth in output per hour of all
persons and the contributions of capital intensity, labor composition, and 
multifactor productivity, by major sector, selected periods, 1987-2008
            
(Percent per year) 

	           1987-2008 1987-1990 1990-1995 1995-2000 2000-2007 2007-2008
Private business1						
						
Output per hour 
of all persons	        2.2	 1.6	  1.5	    2.7	      2.6	2.7
						
Contribution of 
capital intensity2	0.9	 0.6	  0.6	    1.2	      0.9	1.6
						
Contribution of
labor composition3	0.3	 0.4	  0.5	    0.2       0.2	0.0
						
Multifactor 
productivity4           1.1	 0.6	  0.5	    1.3	      1.5	1.2

Private nonfarm
business1						
						
Output per hour
of all persons	        2.2	 1.5	  1.6	    2.5	      2.5	2.8
						
Contribution of
capital intensity2	0.9	 0.6	  0.6	    1.2	      0.9	1.6
						
Contribution of
labor composition3	0.3	 0.4	  0.5	    0.2	      0.2	0.1
						
Multifactor 
productivity4	        1.0	 0.5	  0.5	    1.1	      1.4	1.1

1 Excludes government enterprises.
2 Growth rate in capital services per hour multiplied by capital's share of 
current dollar costs.
3 Growth rate of labor composition (the growth rate of labor input less the
growth rate of the hours of all persons) multiplied by labor's share of current
dollar costs.
4 Output per unit of combined labor and capital inputs.

Note: Multifactor productivity plus contribution of capital intensity and 
labor composition may not sum to output per hour due to independent rounding.  

Comprehensive tables containing additional data not included in this news 
release are available at http://www.bls.gov/mfp/mprdload.htm or in print upon
request. 




 
Note: Multifactor productivity plus contribution of capital intensity and 
labor composition may not sum to output per hour due to independent rounding.  

Notes

While capital services by major sector are estimated for 2008, these 
preliminary estimates do not include an update of capital services by asset 
type.  Measures of capital services through 2007 can be found in tables 5
and 6 of “Multifactor Productivity Trends, 2007” located at 
http://www.bls.gov/news.release/archives/prod3_03252009.pdf. 

The data in this press release reflect updated methodology that was 
introduced in the March 25th, 2009 press release, 
“Multifactor Productivity Trends, 2007” located at
http://www.bls.gov/news.release/archives/prod3_03252009.pdf. 
These data reflect updated and revised data sources, improved 
measures of rates of return on capital stock, and, to a larger extent, 
improved methodology in labor composition, described in “Changes in the
Composition of Labor for BLS Multifactor Productivity Measures, 2007”,
available at http://www.bls.gov/mfp/mprlabor.pdf.

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Last Modified Date: October 30, 2020