Nonfarm Productivity QoQ

Nonfarm Productivity QoQ is the quarterly change in United States nonfarm business output per hour. Output per hour means real output divided by hours worked by all persons. It covers all national output and hours except farming, government, nonprofit institutions and private households. It is not a survey but a compilation from existing output and hours sources.

It does not measure individual effort, skill or profits. Gains reflect joint effects such as technology, capital investment, output scale, organization and management.

Jobs and hours inputs are seasonally adjusted and averaged across the quarter. Quarterly output comes from national income and product accounts. Releases are embargoed until 8:30 Eastern Time, about 1 week after national output reports. Each release also shows hourly compensation, real hourly pay, unit labor costs and price deflators.

A first estimate appears within 40 days of quarter end, with later revisions to reflect fuller source data. Rising unit labor costs signal producer inflation pressure, while productivity gains offset pay growth and lower unit costs.

Productivity rises when real output grows faster than hours worked. Strength in output lifts the ratio, while longer hours lower it without matching output.

• Real output index: inflation adjusted value added that forms the productivity numerator.

• Hours worked by all persons: total work time from payroll and household sources that forms the denominator.

• Hourly compensation: wages plus benefits and imputed proprietor pay that feeds unit labor costs.

• Consumer price deflator: consumer price index that converts hourly pay into real pay.

For example, output growth of 3.7% with hours growth of 0.4% gives productivity growth near 3.2%. Unit labor costs then rise about 0.5% after pay growth.

Build real output: subtract government, nonprofit, household and farm output from national output to form an annually weighted index.

Build hours worked: combine payroll jobs times hours, adjusted to hours worked, plus self employed hours, then seasonally adjust.

Divide for productivity and costs: productivity equals output divided by hours and pay equals compensation divided by hours. Unit labor costs equal pay divided by productivity. Real pay equals hourly pay divided by consumer prices.

Index and growth rates: publish indexes set to 100 in the base year, with quarterly change at annual rate and year on year change. Quarterly change annualizes the quarter to quarter ratio, while yearly change compares with four quarters earlier.

For illustration, output index 116.0 divided by hours index 105.2 gives productivity about 110.3. Hourly pay index 131.8 divided by productivity gives unit labor costs about 119.5.