1 Refers to gross sectoralproduct, annual-weighted.
2 Hours at work of all persons engaged in the businessand nonfarm business sectors (employees, proprietors, and unpaid familyworkers); employees' and proprietors' hours in manufacturing.
3 Wages and salaries of employees plus employers'contributions for social insurance and private benefit plans. Alsoincludes an estimate of same for self-employed. Real compensationdeflated by the consumer price index research series, see text,
Section 15, Prices. 4 Hourly compensation divided by output per
hour. 5 All changes are from the immediate prior year.

Source: U.S. Bureau of Labor Statistics, News USDL 00-125,Productivity and Costs; and Internet site

http://stats.bls.gov/newsrels.htm****************************************************************************************Output per hour measuresOutput. Real gross domestic product in the business andnonfarm business sectors is the basis of the output componentsof the major sector labor productivity and multifactorproductivity measures. These output components are based onand are consistent with the National Income and ProductAccounts (NIPA), including the gross domestic product(GDP) measure, prepared by the Bureau of EconomicAnalysis (BEA) of the U.S. Department of Commerce6.

Real business sector output is an annual-weighted(Fisher-Ideal) index. It is constructed from the gross domesticproduct (GDP) excluding the following outputs: Generalgovernment, nonprofit institutions, paid employees of privatehouseholds, and the rental value of owner-occupieddwellings. These same exclusions are made when calculatingcurrent dollar output for the sector. The business sectorthereby excludes many activities where it is difficult to drawinferences on productivity from NIPA output measures. Suchinferences would be questionable mainly because the outputmeasures are based largely on incomes of input factors. Thefarm sector, which is subject to unique external forces, also isexcluded to yield the nonfarm business sector, the principalfocus of many productivity studies. Nonfinancial corporateoutput is similar to that of the business sector but alsoexcludes unincorporated businesses and those corporationswhich are depository institutions, nondepository institutions,security and commodity brokers, insurance carriers, regulatedinvestment offices, small business offices, and real estateinvestment trusts.

Annual manufacturing indexes for both the quarterly laborproductivity and KLEMS multifactor productivity measuresare constructed by deflating the current-dollar industry valueof production provided by the U.S. Bureau of the Census withdata from BEA. These deflators are constructed by BEA bycombining data from the BLS producer price program andother sources. The industry shipments are aggregated usingannual weights, and intrasector transactions are removed7.Quarterly manufacturing output measures are based on theindex of industrial production prepared monthly by the Boardof Governors of the Federal Reserve System, adjusted to beconsistent with the annual indexes of manufacturing sectoroutput prepared by BLS.

Labor input. The primary source of hours and employmentdata is the BLS Current Employment Statistics (CES)program, which provides monthly survey data on totalemployment and employment and average weekly hours ofproduction and nonsupervisory workers in nonagriculturalestablishments. Jobs rather than persons are counted, so thatmultiple jobholders are counted more than once.

The CES data are based on payroll records from a sample ofestablishments in which the probability of sample selection isrelated to the establishment size. Data on employment, hours,and earnings are collected monthly; the reference period forthese data is the payroll period including the 12th of themonth. (The CES methods are described in chapter 2.)Establishment data are published monthly in Employment andEarnings.

Because CES data include only nonfarm wage and salaryworkers, data from the Current Population Survey (CPS) areused for farm employment. In the nonfarm sector, the CPS isalso used for proprietors and unpaid family workers.Government enterprise hours are developed from the NationalIncome and Product Accounts estimates of employment andCPS data on average weekly hours.

Separate estimates for employment and hours paid aredeveloped for each major sector, converted to anhours-at-work basis. The labor input of employees ofnonprofit corporations are estimated based on data from theCommerce Department's Bureau of the Census and Bureau ofEconomic Analysis and subtracted from the totals for eachmajor sector. Hours of labor input are treated as homogeneousunits; no distinction is made among workers with differentskill levels or wages.

For nonmanufacturing sectors, employment and averageweekly hours are computed from the CES, CPS, and NIPAsources. Although CES data on average weekly hours referonly to nonsupervisory workers, it is assumed for thecomputation of hours that the length of the workweek in eachnonmanufacturing industry is the same for all wage and salaryworkers.

In manufacturing, separate measures for production andnonproduction workers' hours are derived and aggregated tothe manufacturing total. Employment and average weeklyhours for production workers and employment fornonproduction workers are taken directly from CES data.Average weekly hours for nonproduction workers weredeveloped from BLS studies of wages and supplements inmanufacturing which provide data on the regularly scheduledworkweek of white-collar employees.

In the CES, weekly hours are measured as hours paid ratherthan hours at work. The Hours at Work Survey is used toconvert the hours paid of nonagricultural production andnonsupervisory employees to an hours-at-work basis.8 Hoursat work exclude all forms of paid leave, but include paid timeto travel between job sites, coffee breaks, and machinedowntime. This survey of about 5,500 establishments hascollected quarterly and annual ratios of hours at work to hourspaid since 1981.9 (See BLS form 2000P1 in the printededition of the Handbook of Methods for a sample datacollection form for manufacturing industries. Form 2000N1 isa virtually identical form for nonmanufacturing industries andis not reproduced.) Ratios are developed for each 2-digit SICindustry within manufacturing and for each 1-digit SICindustry outside of manufacturing.

Unpublished data and one-time surveys have been used toextend the annual ratios back to 1947 as well as developratios for nonproduction and supervisory workers.10 Thequarterly ratios are not currently used in the quarterlymeasures of labor input. Instead, a quadratic minimizationformula devised by Frank Denton is used to generate quarterlyratios.11

The resultant quarterly measures are used to convert the paidhours of nonfarm employees to an hours-at-work basis. Theestimates of hours of farm workers, proprietors, unpaid familyworkers, employees of government enterprises, and paidemployees of private households are collected on anhours-at-work basis. These hours are only adjusted to includeinformation on those persons who are employed but not atwork during the survey week.

Compensation and labor costs. BEA develops employeecompensation data as part of the national income accounts.These quarterly data include direct payments to laborwagesand salaries (including executive compensation),commissions, tips, bonuses, and payments in kind representingincome to the recipientsand supplements to these directpayments. Supplements consist of vacation and holiday pay,all other types of paid leave, employer contributions to fundsfor social insurance, private pension and health and welfareplans, compensation for injuries, etc.

The compensation measures taken from establishment payrollsrefer exclusively to wage and salary workers. Labor costwould be seriously understated by this measure of employeecompensation alone in sectors such as farm and retail trade,where hours at work by proprietors represent a substantialportion of total labor input. BLS, therefore, imputes acompensation cost for labor services of proprietors andincludes the hours of unpaid family workers in the hours of allemployees engaged in a sector. Labor compensation per hourfor proprietors is assumed to be the same as that of theaverage employee in that sector for measures found in theBLS news release, "Productivity and Costs."