Productivity and Costs for 2024

Nonfarm business sector labor productivity increased 1.5 percent in the fourth quarter of 2024, the U.S. Bureau of Labor Statistics reported today, as output increased 2.4 percent and hours worked increased 0.8 percent. (All quarterly percent changes in this release are seasonally adjusted annualized rates.) From the same quarter a year ago, nonfarm business sector labor productivity increased 2.0 percent in the fourth quarter of 2024. Annual average productivity was revised up 0.4 percentage point to an increase of 2.7 percent from 2023 to 2024.

Unit labor costs in the nonfarm business sector increased 2.2 percent in the fourth quarter of 2024, reflecting a 3.8-percent increase in hourly compensation and a 1.5-percent increase in productivity. Unit labor costs increased 2.0 percent over the last four quarters. Unit labor costs in the nonfarm business sector increased 2.2 percent in the fourth quarter of 2024,
reflecting a 3.8-percent increase in hourly compensation and a 1.5-percent increase in productivity. Unit labor costs increased 2.0 percent over the last four quarters.

Labor productivity, or output per hour, is calculated by dividing an index of real output by an index of hours worked by all workers, including employees, proprietors, and unpaid family workers. During the current business cycle, starting in the fourth quarter of 2019, labor productivity has grown at an annualized rate of 1.9 percent, reflecting a 2.5-percent rate of growth in output and a 0.6-percent rate of growth in hours worked.

The 1.9-percent annualized rate of productivity growth in the
current business cycle thus far is higher than the 1.5-percent rate of the previous business cycle from the fourth quarter of 2007 through the fourth quarter of 2019, and is below the long-term rate of 2.1 percent
since the first quarter of 1947.

Manufacturing sector labor productivity increased 0.3 percent in the fourth quarter of 2024, as output decreased 1.3 percent and hours worked decreased 1.6 percent. In the durable manufacturing sector,
productivity decreased 1.1 percent, reflecting a 3.2-percent decrease in output and a 2.1-percent decrease in hours worked. Nondurable manufacturing sector productivity increased 1.4 percent, as output
increased 0.6 percent and hours worked decreased 0.8 percent. Total manufacturing sector productivity increased 0.4 percent from the same quarter a year ago.

Unit labor costs in the total manufacturing sector increased 3.7 percent in the fourth quarter of 2024, reflecting a 4.0-percent increase in hourly compensation and a 0.3-percent increase in productivity. Manufacturing unit labor costs increased 2.0 percent from the same quarter a year ago.

Manufacturing sector labor productivity has grown at an annualized rate of 0.3 percent during the current business cycle, as output was unchanged (0.0 percent) and hours have declined 0.3 percent. (See
chart 4.) The 0.3-percent annualized rate of productivity growth in the current business cycle thus far is above the 0.1-percent rate of the previous business cycle from the fourth quarter of 2007 through the
fourth quarter of 2019 and is below the long-term rate of 2.1 percent since the first quarter of 1987.

The concepts, sources, and methods used for the manufacturing output series differ from those used in the business and nonfarm business output series; these output measures are not directly comparable.

Revised measures
Third quarter, fourth quarter, and annual average data for 2024 were revised to incorporate regular updates of source data on output and compensation published by the Department of Commerce on
February 27, 2025. Quarterly measures of real hourly compensation in 2024 were revised to reflect updates to seasonally adjusted data from the BLS Consumer Price Index program released on February
12, 2025.

Quarterly and annual measures of hours worked and related measures—including productivity—were revised historically for all major sectors. The revisions reflect incorporation of revised BLS Current
Employment Statistics (CES) program data for employment and hours of employees on nonfarm payrolls. CES revisions extended back to 1990, and links from the current to the previous hours worked
methodology implied small revisions to the historical series. Revisions to employment and hours worked from 2020 to 2024 also reflect revised seasonal adjustment of hours worked by nonfarm self-employed
and unpaid family workers, all farm workers, and employees of government enterprises.

These measures, based on source data from the BLS Current Population Survey (CPS), are seasonally adjusted by the BLS Major Sector Productivity program. Because hours worked were revised for the index base year of 2017, indexes of hours worked, productivity, and related measures were revised back to 1947. Six out of the eight quarters since the first quarter of 2023 saw a downward revision to hours worked while output was unrevised in all but the latest quarter, resulting in the upward revisions to labor productivity.

Read the full article courtesy of the US Bureau of Labor Statistics.