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Tag Archives: Recession

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

Let’s Celebrate the Productive U.S. Workforce

Earlier this month our nation celebrated Labor Day. We celebrate Labor Day for many good reasons, but one of the best is to appreciate, even for just one day, how amazingly productive our nation’s workforce is. As we shop online or in stores, we rarely stop to think about the skills and effort it takes to produce our goods and services. Let’s take a moment to celebrate that productivity and the progress we have seen in the last few years.

Indeed, productivity of labor is at the heart of the American economy. How much workers produce for each hour they labor and how efficiently they use resources determines the pace of economic growth and the volume of goods that supply everyone (workers included) with the products and services that shape our daily lives. Growing productivity means that our standard of living very likely is improving.

Our workers are very productive. On average, each U.S. worker produced goods and services worth $129,755 last year. That’s compared with the next largest world economies: Germany at $99,377; the United Kingdom at $93,226; Japan at $78,615; China at $32,553; and India at $19,555.

Despite our great reliance on rising productivity to attain the good things of life, academics and researchers still marvel at the mysteries that surround the subject. What drives productivity change? What are the key factors behind these international differences in output per worker?

For example, does the quality of labor alone determine the rate of productivity growth? It is certainly a component of what drives labor productivity, although some countries have high educational and training levels but low productivity per worker. Labor quality has been steadily rising in the United States, but we don’t know the impact on productivity as the baby boomers retire and are replaced.

What is the right mix of labor and technology needed for changing the productivity growth rate? How can we measure the value of the dignity of work, or the personal and social value that work yields? And, what is the role of technical knowledge and product design in determining the productivity of labor?

Then there’s the mysterious role of innovation. Economists think they know that invention and scientific breakthroughs can make massive changes to productivity. However, which innovations transform productivity, and have all the low-lying fruits of productivity enhancement already been harvested?

Despite our strong international showing, analysts who watch these data may be a tad bit concerned with the sluggishness in U.S. productivity growth over the past 10 years. Since 2011, the rate of growth in labor productivity has slowed to one-third of the pace shown between 2000 and 2008, despite acceleration in the past 2 years. Even when we broaden the concept of productivity to include the output attributable to the combination of labor and other productive factors (also known as multifactor productivity), the rate of growth is still one-third of the pace it was in the first decade of this century.

Even with a subsidence in the growth rate, it is worth noting that both labor input and output are on the rise. Since the start of the current business cycle expansion in 2009, the rate of growth in labor input has been five times what it was prior to the Great Recession during the previous expansion.

Output has also grown steadily, but at a slower rate than hours. Because labor productivity is the quotient of output divided by hours, productivity can slow even when both components are rising. The relationship between the relative growth of output and hours is one of the many features that makes productivity both challenging and fascinating to study.

The Bureau of Labor Statistics engages with an extensive network of researchers in and out of the academic community whose mission is, like ours, to better understand and measure the productivity of the U.S. labor force. Labor productivity is an amazing subject because it incorporates so many facets of the nation’s economy into one statistic. By peeling back layers and looking at the details behind the summary number, we can gain valuable insight on the hours and output of our nation’s workforce. We will continue to produce and provide context for these valuable statistics that help tell the story of America’s workers.

That said, we should never lose sight of the big picture. America’s workers lead the world in their capacity to create the goods and services that define our economy and improve our lives. And that, certainly, is something great to celebrate!

Labor Day 2019 Fast Facts

I have been Commissioner of Labor Statistics for 5 months now, and I continue to be amazed by the range and quality of data we publish about the U.S. labor market and the well-being of American workers. As we like to say at BLS, we really do have a stat for that! We won’t rest on what we have done, however. We continue to strive for more data and better data to help workers, jobseekers, students, businesses, and policymakers make informed decisions. Labor Day is a good time to reflect on where we are. This year is the 125th anniversary of celebrating Labor Day as a national holiday. Before you set out to enjoy the long holiday weekend, take a moment to look at some fast facts we’ve compiled on the current picture of our labor market.

Working

Working or Looking for Work

  • The civilian labor force participation rate—the share of the population working or looking for work—was 63.0 percent in July 2019. The rate had trended down from the 2000s through the early 2010s, but it has remained fairly steady since 2014.

Not Working

  • The unemployment rate was 3.7 percent in July. In April and May, the rate hit its lowest point, 3.6 percent, since 1969.
  • In July, there were 1.2 million long-term unemployed (those jobless for 27 weeks or more). This represented 19.2 percent of the unemployed, down from a peak of 45.5 percent in April 2010 but still above the 16-percent share in late 2006.
  • Among the major worker groups, the unemployment rate for teenagers was 12.8 percent in July 2019, while the rates were 3.4 percent for both adult women and adult men. The unemployment rate was 6.0 percent for Blacks or African Americans, 4.5 percent for Hispanics or Latinos, 2.8 percent for Asians, and 3.3 percent for Whites.

Job Openings

Pay and Benefits

  • Average weekly earnings rose by 2.6 percent from July 2018 to July 2019. After adjusting for inflation in consumer prices, real average weekly earnings were up 0.8 percent during this period.
  • Civilian compensation (wage and benefit) costs increased 2.7 percent in June 2019 from a year earlier. After adjusting for inflation, real compensation costs rose 1.1 percent over the year.
  • Paid leave benefits are available to most private industry workers. The access rates in March 2018 were 71 percent for sick leave, 77 percent for vacation, and 78 percent for holidays.
  • About 91 percent of civilian workers with access to paid holidays receive Labor Day as a paid holiday.
  • In March 2018, civilian workers with employer-provided medical plans paid 20 percent of the cost of medical care premiums for single coverage and 32 percent for family coverage.

Productivity

  • Labor productivity—output per hour worked—in the U.S. nonfarm business sector grew 1.8 percent from the second quarter of 2018 to the second quarter of 2019.
  • Some industries had much faster growth in 2018, including electronic shopping and mail-order houses (10.6 percent) and wireless telecommunications carriers (10.1 percent).
  • Multifactor productivity in the private nonfarm business sector rose 1.0 percent in 2018. That growth is 0.2 percentage point higher than the average annual rate of 0.8 percent from 1987 to 2018.

Safety and Health

Unionization

  • The union membership rate—the percent of wage and salary workers who were members of unions—was 10.5 percent in 2018, down by 0.2 percentage point from 2017. In 1983, the first year for which comparable union data are available, the union membership rate was 20.1 percent.

Work Stoppages

  • In the first 7 months of 2019, there have been 307,500 workers involved in major work stoppages that began this year. (Major work stoppages are strikes or lockouts that involve 1,000 or more workers and last one full shift or longer.) For all of 2018, there were 485,200 workers involved in major work stoppages, the largest number since 1986, when about 533,100 workers were involved.
  • There have been 15 work stoppages beginning in 2019. For all of 2018, 20 work stoppages began during the year.

Education

  • Occupations that typically require a bachelor’s degree for entry made up 22 percent of employment in 2018. This educational category includes registered nurses, teachers at the kindergarten through secondary levels, and many management, business and financial operations, computer, and engineering occupations.
  • For 18 of the 30 occupations projected to grow the fastest between 2016 and 2026, some postsecondary education is typically required for entry. Be sure to check out our updated employment projections, covering 2018 to 2028, that we will publish September 4!

From an American worker’s first job to retirement and everything in between, BLS has a stat for that! Want to learn more? Follow us on Twitter @BLS_gov.

Labor Day 2018 Fast Facts

About 92 percent of civilian workers with access to paid holidays receive Labor Day as a paid holiday. Before you set out for that long holiday weekend, take a moment to look at some fast facts we’ve compiled that show the current picture of our labor market.

Working

Working or Looking for Work

  • The civilian labor force participation rate—the share of the population working or looking for work—was 62.9 percent in July. The rate had trended down from the 2000s through the early 2010s, but it has remained fairly steady since 2014.

Not Working

  • The unemployment rate was 3.9 percent in July. After 6 months at 4.1 percent, the rate has had offsetting movements in recent months. In May, the rate hit its lowest point, 3.8 percent, since April 2000.
  • In July, there were 1.4 million long-term unemployed (those jobless for 27 weeks or more). This represented 22.7 percent of the unemployed, down from a peak of 45.5 percent in April 2010 but still above the 16-percent share seen in late 2006.
  • Among the major worker groups, the unemployment rate for teenagers was 13.1 percent in July, while the rates were 3.4 percent for adult men and 3.7 percent for adult women. The unemployment rate was 6.6 percent for Blacks or African Americans, 4.5 percent for Hispanics or Latinos, 3.1 percent for Asians, and 3.4 percent for Whites.

Job Openings

Pay and Benefits

  • Average weekly earnings rose by 3.0 percent between July 2017 and July 2018; adjusted for inflation, real average weekly earnings are up 0.1 percent during this period.
  • Civilian compensation (wage and benefit) costs increased 2.8 percent between June 2017 and June 2018; adjusted for inflation, real compensation costs decreased 0.1 percent during this period.
  • Paid leave benefits are available to most private industry workers. The access rates in March 2018 were 71 percent for sick leave, 77 percent for vacation, and 78 percent for holidays.
  • In March 2018, civilian workers paid 20 percent of the cost of medical care premiums for single coverage and 32 percent for family coverage.

Productivity

  • Labor productivity—output per hour worked—in the U.S. nonfarm business sector grew 1.1 percent in 2017, continuing the historically below-average pace seen since the Great Recession. Some industries had impressive growth, however, including wireless telecommunications carriers (11.1 percent) and electronics and appliance stores (9 percent).
  • Multifactor productivity growth in the private nonfarm business sector recovered in 2017, rising 0.9 percent after falling 0.6 percent in 2016. Labor input for multifactor productivity—measured using the combined effects of hours worked and labor composition—grew 2.0 percent in 2017, outpacing the long-term 1987–2017 growth for labor input by 0.5 percentage points.

Safety and Health

  • In 2017, 14.3 percent of all workers were exposed to hazardous contaminants. The use of personal protective equipment was required for 11.8 percent of workers.

Education

  • Occupations that typically require a bachelor’s degree for entry made up 21.5 percent of employment. This educational category includes registered nurses, teachers at the kindergarten through secondary levels, and many management, business and financial operations, computer, and engineering occupations.
  • For 18 of the 30 occupations projected to grow the fastest between 2016 and 2026, some postsecondary education is typically required for entry.

Unionization

  • The union membership rate—the percent of wage and salary workers who were members of unions—was 10.7 percent in 2017, unchanged from 2016. In 1983, the first year for which comparable union data are available, the union membership rate was 20.1 percent.
  • Total employer compensation costs for union workers were $47.65 and for nonunion workers $32.87 per employee hour worked. The cost of benefits accounted for 40.4 percent of total compensation or $19.23 for union workers and 29.1 percent or $9.56 for nonunion workers.

Work Stoppages

  • In the first 7 months of 2018, there were 445,000 workers involved in work stoppages that began this year. This is the largest number of workers involved in stoppages since 2000, when 394,000 workers were involved. There have been 12 stoppages beginning this year, which surpassed the 7 recorded in all of 2017.

From an American worker’s first job to retirement and everything in between, BLS has a stat for that! Want to learn more? Follow us on Twitter @BLS_gov.

Entrepreneurship Facts: Announcing New Research Data on Job Creation and Destruction by Firm Age and Size

I’m delighted to announce that we now have new research data on job gains and losses by firm age and size across industries and states.

For many years, policymakers, economists, and others have debated whether small or large firms create more jobs. Our Business Employment Dynamics program, which measures gross job gains and losses to help us understand net employment changes, informs that debate with data on firm size. A related question is whether startups or older establishments create more jobs. Again, BLS has a stat for that. We have data on employment and business survival rates by the age of the establishment.

While it’s useful to know the age of an establishment—that is, a single location of a business—for some questions, we need to know the age of the firm. A firm may include several or even many establishments. To understand entrepreneurship in particular, we want to know how both the age and size of firms affect job gains, job losses, and employment growth.

With these new data we can answer many interesting questions, including:

  • How much do older firms contribute to job growth? Firms 10 years or older created 800,000 jobs, or 29 percent of the total 2.7 million net employment gain in the year ending March 2015. See the chart below.
  • How much do startup firms contribute to job growth? In the year ending March 2015, startup firms—firms less than 1 year old—created 1.7 million jobs or 60 percent of total employment growth. More than half these jobs were from firms with fewer than 10 employees.
  • How does the age or size of the firm affect the rate of business closures? In 2015, 788,000 establishments closed. Of these, 55 percent were from firms 10 years or older; 16 percent were from firms 5 to 9 years old; and 28 percent were from firms less than 4 years old. Of the establishments that closed from March 2014 to March 2015, 91,000 of them, or 12 percent of the total, had 500 or more employees.
  • Which firm-age group accounted for most job losses during the last two recessions? Firms 10 years or older lost the most jobs during both recessions. Again, see the chart below.

net-job-changes-by-firm-age

The new research data measure annual gross job gains and gross job losses by firm age and size from March of one year to March of the next. We get the data on firms from the Quarterly Census of Employment and Wages by linking individual establishments over time. Besides firm age and size, we also measure establishment age and size. We have two methods to examine size. One method compares the current size of firms or establishments with the size at the beginning of the year (the base-sizing method). The other method compares the current size with the average size over the year (the average-sizing method).

I really want to know how you like these new data and what we can do to make them more useful. I invite you to explore the data and share your comments. Your feedback will help us develop the dataset and possibly move it into our regular production. Please write your comments below, or you can email the Business Employment Dynamics staff.