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Tag Archives: Output

Productivity Perspective of the 2020 COVID-19 Pandemic

Labor productivity, a key measure of the health of the U.S. economy, had been rising steadily but slowly throughout the 2010s—just over one percent per year on average. But what happens when the economy is thrown into a sudden decline by an unprecedented shock? COVID-19 landed in the United States in the early months of 2020, and it did not take long for its effects on productivity to hit hard and fast.

First, some background. Labor productivity is the ratio of real output to hours worked. Productivity increases when the output of goods and services increases faster than the amount of labor needed to produce the goods and provide the services. Productivity growth is often thought to show that businesses are becoming more efficient and profitable, but the path to positive productivity is not always desirable. Productivity may also increase when output falls but hours worked fall faster.

During 2020, two distinct paths yielded positive productivity growth. From the first quarter to the second quarter of 2020, hours worked decreased more than output. We can think of this path as businesses rapidly cutting hours and employment faster than output fell. Conversely, in the third quarter of 2020, the economy began to rebound, and the increase in demand for goods and services outpaced the rising labor hours, also resulting in positive labor productivity growth. (See chart 1).

When looking at the growth rates for output, hours worked, and productivity, we annualize the numbers, meaning these are the growth rates we would observe if the change in a quarter were to continue at that rate for an entire year. The data presented here are for the nonfarm business sector, covering about three-fourths of the U.S. economy, from the end of 2019 to the end of 2020. Although we report labor productivity measures quarterly, we incorporated higher frequency data to more accurately capture the rapid changes resulting from the COVID-19 pandemic.

Chart 1. Output, hours worked, and labor productivity, nonfarm business sector, fourth quarter 2019 to fourth quarter 2020

Editor’s note: Data for this chart are available in the table below.

First Quarter 2020, Pandemic on the Horizon

Although the COVID-19 pandemic began during the first quarter of 2020, data from January and February were not significantly affected by the pandemic; business closures and job losses didn’t occur until the latter part of March. Since only one out of three months in the first quarter was affected, the decreases were modest compared to what was to come in the second quarter. Nevertheless, both output (-6.4 percent) and hours worked (-5.6 percent) declined in the first quarter, the first decreases since the second quarter of 2009. The declines in first quarter 2020 were an early sign of the drastic decreases we were about to see. While labor productivity declined only 0.8 percent at an annual rate in the first quarter, this was the first decline in labor productivity since the second quarter of 2017.

Second Quarter 2020, COVID-19 Rears Its Ugly Head

The second quarter of 2020 saw historically large decreases in both output and hours worked. Our measures of nonfarm business began in 1947, and the second quarter of 2020 had the largest declines ever recorded in both output (-36.8 percent) and hours worked (-43.2 percent). While the resulting labor productivity growth of 11.1 percent was the largest increase since the first quarter of 1971 (12.3 percent), the large increase in second quarter 2020 resulted from the devastation of the U.S. economy in terms of both employment and output.

How can productivity grow at near a record rate with such large declines in output and hours worked? Remember the different paths to positive labor productivity. Many consumers avoided stores, restaurants, and other public gatherings to reduce the risk of catching or spreading the virus that causes COVID-19. With shutdowns of nonessential businesses and limited contact and other restrictions for businesses still opened, businesses had to adapt quickly to reduce work hours while trying to preserve output. For example, many eating establishments focused on carryout and outdoor seating to limit their revenue loss. Additionally, online buying and home delivery became more widespread. The data from the second quarter show hours worked fell faster than output, resulting in productivity growth.

Third Quarter 2020, the Road to Recovery

By the third quarter of 2020, both output and hours worked began to climb again and in a big way. Many more businesses had shifted operations online or tried to bring workers back and resume normal operations. Following the historically large declines in the second quarter, we saw historically large increases in the third quarter in both output (44.1 percent) and hours worked (38.3 percent). With output recovering more quickly than hours worked, labor productivity grew by a robust 4.2 percent.

The automotive industry is one that highlights the jumpstart to recovery. In the second quarter, automotive production factories stopped almost entirely, resulting in output and hours worked plummeting. Once they started to reopen in the third quarter, both hours worked and output rebounded. While the third quarter outcome was positive, both output and hours worked still had not returned to their values before the pandemic, meaning much more work remained to fully recover. It is important to remember nonfarm employment at the end of the third quarter was still 10.7 million below the level at the start of the pandemic.

Fourth Quarter 2020, on the Right Track

The fourth quarter continued the large growth for both output (5.5 percent) and hours worked (10.1 percent). This quarter shows how negative productivity is not always a negative thing. In this case, hours worked outpaced output growth, leading to a productivity decline.

When we look over the past year, we see that we are digging out of the huge decline in the second quarter of 2020. The fourth quarter of 2020 was the second straight increase in both hours and output. In the fourth quarter of 2020, output was only 2.6 percent below the level a year earlier, and hours worked were 4.9 percent below. (See chart 2). After the labor productivity rollercoaster ride of 2020, the fourth quarter data suggest things may be on a path to normalcy.

Chart 2. Output and hours worked indexes, nonfarm business sector, fourth quarter 2019 to fourth quarter 2020

Editor’s note: Data for this chart are available in the table below.

Pandemic in Perspective

So how does productivity in a pandemic compare with other major economic events like the Great Recession? From 2007 to 2009, both output and hours worked declined (see chart 3), as the U.S. economy endured a period known as the “Great Recession.” (To learn more, see “Below Trend: the U.S. productivity slowdown since the Great Recession.”) In 2020, both output and hours worked declined at the start of the pandemic. The wild changes from quarter to quarter during the rest of the year were unprecedented, even for an economic downturn. Over the past decade, the movements in output, hours, and productivity were usually small, making 2020 even more unusual.

The last time productivity growth was close to what it was in the second quarter of 2020 was in the second quarter of 2009. Labor productivity typically spikes at the start of an economic recovery because output rises faster than businesses can restore hours. In both the Great Recession and the 2020 pandemic, the magnitude of the changes in output and hours worked were larger than usual. In the Great Recession it took several quarters to see gains in hours worked, whereas 2020 saw a faster turnaround as businesses began to reopen and government restrictions eased in the third quarter. In fact, hours worked in the fourth quarter of 2020 grew faster than output, causing productivity to decline.

Chart 3. Output, hours, and  labor productivity indexes in the nonfarm business sector, 2007–20

Editor’s note: Data for this chart are available in the table below.

BLS labor productivity data help us study efficiencies and the economic well-being of the country. Positive labor productivity isn’t always positive. The components that make up the labor productivity measure—output and hours worked—should not be examined alone but rather together to fully understand productivity’s effect on economic growth.

During unprecedented events like the COVID-19 pandemic, historical trends in productivity can provide important context into the economic environment. We at BLS, like many of you, will be very interested to see how the economy recovers and what that will mean for productivity and the economy.

Want to Learn More?

To dive into the data for yourself, check out the BLS webpages on labor productivity. Get the most recent news release to see the data firsthand! Check out Productivity 101 and our video “What is Productivity?” to learn more about the concepts of productivity.

If you have a specific question, you might find it answered in our Frequently Asked Questions. Or you can always contact our staff by email or call (202) 691-5606.

Chart 1. Output, hours worked, and labor productivity, nonfarm business sector, fourth quarter 2019 to fourth quarter 2020
QuarterOutputHours workedLabor productivity

Q4 2019

2.8%1.3%1.5%

Q1 2020

-6.4-5.6-0.8

Q2 2020

-36.8-43.211.1

Q3 2020

44.138.34.2

Q4 2020

5.510.1-4.2
Chart 2. Output and hours worked indexes, nonfarm business sector, fourth quarter 2019 to fourth quarter 2020
QuarterOutputHours worked

Q4 2019

100.000100.000

Q1 2020

98.36998.573

Q2 2020

87.69585.589

Q3 2020

96.08292.810

Q4 2020

97.36695.067
Chart 3. Output, hours, and labor productivity indexes in the nonfarm business sector, 2007–20
QuarterOutputHours workedLabor productivity

Q1 2007

100.000100.000100.000

Q2 2007

100.820100.442100.377

Q3 2007

101.464100.134101.329

Q4 2007

102.01599.802102.217

Q1 2008

100.88699.531101.361

Q2 2008

101.36398.944102.444

Q3 2008

100.50297.862102.698

Q4 2008

97.40995.434102.069

Q1 2009

95.79593.004103.002

Q2 2009

95.59290.900105.161

Q3 2009

95.93590.031106.559

Q4 2009

97.29689.843108.295

Q1 2010

97.75289.839108.808

Q2 2010

98.85190.689108.999

Q3 2010

99.94191.205109.579

Q4 2010

100.70891.521110.038

Q1 2011

100.16791.652109.291

Q2 2011

101.20292.496109.412

Q3 2011

101.20092.842109.001

Q4 2011

102.63893.537109.730

Q1 2012

103.84994.272110.158

Q2 2012

104.48394.492110.573

Q3 2012

104.72794.868110.392

Q4 2012

104.90595.356110.013

Q1 2013

105.96995.726110.700

Q2 2013

105.97696.095110.282

Q3 2013

107.03596.647110.748

Q4 2013

108.24296.967111.628

Q1 2014

107.72697.426110.573

Q2 2014

109.57298.110111.682

Q3 2014

111.31498.777112.692

Q4 2014

112.07099.904112.177

Q1 2015

113.326100.020113.302

Q2 2015

114.278100.471113.742

Q3 2015

114.683100.817113.753

Q4 2015

114.787101.306113.307

Q1 2016

115.503101.635113.645

Q2 2016

115.821102.017113.531

Q3 2016

116.522102.310113.891

Q4 2016

117.514102.419114.738

Q1 2017

118.213102.823114.966

Q2 2017

118.819103.599114.691

Q3 2017

119.944103.754115.605

Q4 2017

121.319104.488116.108

Q1 2018

122.600105.109116.642

Q2 2018

123.497105.680116.859

Q3 2018

124.208105.970117.211

Q4 2018

124.648106.228117.341

Q1 2019

125.823106.216118.459

Q2 2019

126.204106.032119.025

Q3 2019

127.104106.663119.165

Q4 2019

127.990107.000119.617

Q1 2020

125.902105.474119.369

Q2 2020

112.24191.580122.561

Q3 2020

122.97599.306123.833

Q4 2020

124.619101.722122.510

Why This Counts: Measuring Industry Productivity

At BLS, productivity is the economic statistic that describes the efficiency of production. The productivity statistics you hear about most often in the news are for the entire U.S. economy. But there’s more to the productivity story than just the overall numbers. The economy is made up of hundreds of industries, and each one works in a different way. Productivity data for each industry help us understand how specific types of production have changed over time. Let’s look at a few specific industries to see how labor productivity data can enhance our understanding of their unique production systems.

General Freight Trucking: Technological Innovations

Economic conditions in the general freight trucking industry closely mirror the health of the overall economy. During the 2007–09 recession, both output and hours worked fell dramatically in trucking. Because employment and spending were down nationwide, there was less demand for the transportation of all kinds of goods. After the recession ended, output and hours in trucking picked back up. Output reached prerecession levels by 2014, but in 2018 hours worked were still slightly below their 2007 level.

Dividing output by hours worked yields labor productivity. Because output in trucking has grown faster than hours during the recovery from the recession, labor productivity has increased. This helps us understand the nature of operations in general freight trucking. Innovative technologies such as communications systems, mapping software, and truck-based sensors and monitors known as “telematics” have improved transportation efficiency. These systems allow deliveries to be planned more efficiently with fewer delays, allowing more freight to be delivered without an equivalent increase in worker hours.

General freight trucking, average yearly percent change in output, hours worked, and productivity from 2007 to 2018

Editor’s note: Data for this chart are available in the table below.

Travel Agencies: Digital Transformation

Another industry that has changed the way it operates is travel agencies. Since 2000, output has increased substantially, while hours fell from 2000 to 2010 and have increased only slightly since then. The major transformation for travel agencies has been the Internet. Online tools have allowed clients to make travel reservations with far less help from workers. This increase in efficiency is reflected in the industry’s labor productivity, which has more than tripled from 2000 to 2017.

Travel agencies, average yearly percent change in output, hours worked, and productivity from 2000 to 2017

Editor’s note: Data for this chart are available in the table below.

Supermarkets: Incremental Change

Changes in other industries have been more subtle. Supermarkets are a particularly competitive industry, and firms employ a large number of workers to maintain high levels of customer service. Managing inventories, stocking shelves, checking out merchandise, and staffing specialty stations are all tasks that supermarkets continue to need. But even in supermarkets, productivity has been increasing since 2009, as output has grown faster than worker hours. To continue growing sales with lower costs, many firms in this industry have relied more on labor-saving technology, such as self-checkout machines. This technology increases efficiency by allowing supermarkets to process more transactions with less help from workers.

Supermarkets, average yearly percent change in output, hours worked, and productivity from 2009 to 2018

Editor’s note: Data for this chart are available in the table below.

Cut and Sew Apparel Manufacturing: Establishment Turnover

Productivity declines also can show the changing nature of work. Cut and sew apparel manufacturing has seen much of its production move outside the United States. In 2018, U.S. apparel manufacturers produced less than 15 percent of the output they produced in 1997. Although worker hours also have declined, they have not dropped as much as output, leading to a decline in labor productivity. This indicates a shift over time in the nature of the average apparel manufacturer. While many large establishments moved overseas in search of cheaper labor, the remaining domestic apparel manufacturing establishments are on average smaller and more specialized, requiring more labor-intensive work.

Cut and sew apparel manufacturing, average yearly percent change in output, hours worked, and productivity from 1997 to 2018

Editor’s note: Data for this chart are available in the table below.

To Learn More

BLS industry productivity data help us study the efficiencies of economic activities. Historical trends in productivity provide an important window into each industry’s working conditions, competitiveness, contribution to the economy, and potential for future growth. These data are used by investors, business leaders, jobseekers, researchers, and government decision makers. We have annual labor productivity measures for over 275 detailed industries.

To dive into the data for yourself, check out the BLS webpages on labor productivity. You also can see productivity data in a brand new way using our industry productivity viewer! Even more specialized industry data are on our webpages for hospitals, construction industries, elementary and secondary schools, and urban transit systems. We also have a recent article on productivity in grocery stores.

Average yearly percent change in output, hours worked, and productivity in selected industries
IndustryOutputHours workedProductivity

General freight trucking, 2007 to 2018

1.0%-0.1%1.2%

Travel agencies, 2000 to 2017

4.8-3.08.1

Supermarkets, 2009 to 2018

1.90.71.2

Cut and sew apparel manufacturing, 1997 to 2018

-9.4-7.5-2.1