Total Factor Productivity Report for Industries – 2021

Total Factor Productivity Report for Industries – 2021 847 489 Morris County Economic Development Corporation (MCEDC)

Total Factor Productivity Report for Industries – 2021


Total factor productivity–defined as output per unit of combined inputs–rose in 78 of the 86 4-digit NAICS manufacturing industries in 2021, the U.S. Bureau of Labor Statistics reported today. This represents an increase from 2020, when total factor productivity increased in 25 manufacturing industries. Total factor productivity also increased in air transportation and line-haul railroads in 2021. The ten largest 4-digit NAICS manufacturing industries (those with employment over 350,000) all experienced increasing total factor productivity in 2021. (See chart 1.) Output rose in seven of these industries and declined in three industries: aerospace products and parts (-2.9 percent), animal slaughtering and processing (-1.5 percent), and architectural and structural metals (-0.5 percent). Combined inputs (capital, hours worked, materials, energy, and purchased services) increased in only two of these industries: pharmaceuticals and medicines (+1.7 percent) and semiconductors and electronic components (+0.6 percent).

Six of the 78 manufacturing industries with rising total factor productivity in 2021 had increases of more than 15.0 percent:

• Coating, engraving, and heat treating metals (+19.9 percent)

• Clay products and refractories (+19.1 percent)

• Cutlery and handtools (+16.2 percent)

• Sugar and confectionery products (+15.9 percent)

• Rubber products (+15.5 percent)

• Petroleum and coal products (+15.3 percent)

Only three manufacturing industries posted total factor productivity declines of more than 5.0 percent 

• Iron and steel mills and ferroalloys (-20.8 percent)

• Glass and glass products (-5.9 percent)

• Alumina and aluminum production (-5.3 percent)

Total factor productivity increased in each of the two measured transportation industries:

• Air transportation (+44.2 percent)

• Line-haul railroads (+7.2 percent)

Total Factor Productivity: Definition and Concepts

Changes in total factor productivity show the relationship between changes in real output and changes in the combined inputs of labor, capital, and intermediate inputs (energy, materials, and purchased services) used to produce that output. Measures of total factor productivity capture a variety of factors that influence economic growth that are not specifically accounted for among measured inputs, including technological change, returns to scale, enhancements in managerial and staff skills, changes in the organization of production, and other efficiency improvements. Total factor productivity reflects these factors. See the technical note for more information.

Components of Total Factor Productivity Growth:

Output and Combined Inputs The manufacturing sector rebounded in 2021 as output increased in 65 of 86 industries, compared to 17 industries in 2020. (See chart 2.) Among the industries that posted gains, output increased by 15.0 percent or more in the following six industries in 2021:

• Magnetic media manufacturing and reproducing (+60.9 percent) • Motor vehicle bodies and trailers (+24.5 percent)

• Other leather products (+21.9 percent)

• Clay products and refractories (+18.0 percent)

• Coating, engraving, and heat treating metals (+17.6 percent)

• Audio and video equipment (+15.2 percent)

Combined inputs of capital, labor, and intermediate inputs fell in 50 of 86 manufacturing industries in 2021, compared to 71 in 2020. Thirty-one industries saw declines in hours worked. Intermediate inputs fell in 52 industries. Capital also fell in 64 of the manufacturing industries.

Of the 35 industries with rising combined inputs in 2021, the five with the largest gains were:

  • Magnetic media manufacturing and reproducing (+47.3 percent)
  • Motor vehicle bodies and trailers (+13.3 percent)
  •  Other leather products (+8.6 percent) • Iron and steel mills and ferroalloys (+6.3 percent)
  •  Accessories and other apparel (+6.3 percent)

In industries where combined inputs declined faster than output, total factor productivity increased. The greatest productivity gains occurred in:

  • Boilers, tanks, and shipping containers (+12.4 percent)
  • Railroad rolling stock (+12.0 percent)
  •  Animal food (+7.4 percent)
  •  Fruit and vegetable preserving and specialty (+4.8 percent)

Total factor productivity in both measured transportation industries increased because output grew more rapidly than combined input usage. In the air transportation industry, output rose 71.3 percent and combined inputs rose 18.8 percent in 2021. In line-haul railroads, output increased 7.8 percent and combined inputs grew 0.5 percent.

Trends in Total Factor Productivity for Selected Time Periods

Both year-to-year movements and long-term trends in industry total factor productivity may reflect cyclical changes in the economy. This was particularly true in 2021 due to the continuation of the COVID-19 pandemic. While long-term annual percent changes in total factor productivity are affected by economic conditions such as the pandemic, these historical trends are nevertheless more reliable indicators of industry performance. More industries saw total factor productivity growth over the short term than the long term. Over the long-term period from 1987 to 2021, total factor productivity grew in 64 manufacturing industries, compared to 78 from 2020 to 2021. Annual rates of change in total factor productivity for nearly all manufacturing industries ranged between –2.0 percent and +2.0 percent per year over the long term. In contrast, total factor productivity increased by 2.1 percent or more in 70 industries in 2021. Only four industries saw an annual increase of that magnitude from 1987 to 2021. Although the distribution of total factor productivity growth for all the manufacturing industries may change significantly annually, 62 percent of industries are clustered between an increase of 0.1 percent and 1.0 percent in the long run.

Between 1987 and 2021, the number of manufacturing industries with growth in total factor productivity was highest in 1992, 2003, 2010, and 2021. These were years of economic growth following recessions. In contrast, relatively few manufacturing industries saw total factor productivity growth in the recession years of 2001, 2009, and 2020.

Annual percent changes in total factor productivity by industry for sub periods between 1987 and 2021 are shown in table 3. The sub period from 1990 to 1995 saw the greatest number of manufacturing industries with total factor productivity growth. Prior to the pandemic, air transportation total factor productivity grew at an annual rate of 1.2 percent for the period 1987-2019. (See table 2 and chart 5.) However, after accounting for the pandemic years, total factor productivity for the industry rose by an annual rate of only 0.4 percent per year. This change in the long-term trend is mainly due to air transportation output decreasing by 17.6 percent annually over the pandemic period (2019-2021). Output increased 4.0 percent in 2019, fell by 60.3 percent in 2020, and then increased 71.3 percent in 2021. For line-haul railroads, single-year output deepened from a 3.6-percent decline in 2019 to a 15.7-percent decline in 2020, before rebounding in 2021, growing 7.8 percent. This resulted in a 4.7-percent annual output decline between 2019 and 2021. However, this change had a smaller effect on the long-term trend of total factor productivity, which increased 1.7 percent annually in the pre-pandemic 1987-2019 period compared to an increase of 1.5 percent from 1987-2021.