1. Economic Indicators: Introduction
  2. Economic Indicators: Beige Book
  3. Economic Indicators: Business Outlook Survey
  4. Economic Indicators: Consumer Confidence Index (CCI)
  5. Economic Indicators: Consumer Credit Report
  6. Economic Indicators: Consumer Price Index (CPI)
  7. Economic Indicators: Durable Goods Report
  8. Economic Indicators: Employee Cost Index (ECI)
  9. Economic Indicators: Employee Situation Report
  10. Economic Indicators: Existing Home Sales
  11. Economic Indicators: Factory Orders Report
  12. Economic Indicators: Gross Domestic Product (GDP)
  13. Economic Indicators: Housing Starts
  14. Economic Indicators: Industrial Production
  15. Economic Indicators: Jobless Claims Report
  16. Economic Indicators: Money Supply
  17. Economic Indicators: Mutual Fund Flows
  18. Economic Indicators: Non-Manufacturing Report
  19. Economic Indicators: Personal Income and Outlays
  20. Economic Indicators: Producer Price Index (PPI)
  21. Economic Indicators: Productivity Report
  22. Economic Indicators: Purchasing Managers Index (PMI)
  23. Economic Indicators: Retail Sales Report
  24. Economic Indicators: Trade Balance Report
  25. Economic Indicators: Wholesale Trade Report

“The Productivity and Costs Report” is a quarterly release from the Bureau of Labor Statistics (BLS) that measures the level of output that is achieved by businesses per unit of labor. In this context, output is measured by using previously-released gross domestic product (GDP) figures; input is measured in hours worked and the associated costs of that labor. The unit labor costs that are provided take into account more detail than is provided in the earlier labor reports, including the effects of employee benefit plans, stock options expensing and taxes.

Percentage changes, presented in annualized rates, are the key figures released with this report. Separate productivity rates are released for the business sector, non-farm business sector and manufacturing. Manufacturing is kept separate because, unlike the rest of the data, total volume output is used instead of GDP figures, and it also shows the highest volatility of any of the industry groups.

Productivity figures are provided across the economy as a whole, as well as for major industry groups and sub-sectors—it is a very thorough and detailed release, which is the main reason for the long time lag between period end and data release. The BLS will begin with total GDP figures, then remove government production and non-profit contributions to arrive at a GDP component that represents just "corporate America."

 

Why The Productivity Report is important

Increased productivity is the ability of a company to achieve more output with the same workforce level. Strong productivity gains have been one of the most important reasons that the U.S. economy has expanded for the past 25 years. Productivity gains have historically led to gains in real income, lower inflation and increased corporate profitability. A company that is increasing output with the same number of hours worked will likely be more profitable, which means that it can raise wages without passing that cost on to customers, which keeps inflation pressures down, while adding to GDP growth.

The productivity report does not give investors any new data sets; its value is in the calculations and derivations the BLS computes on previously-released data.

 

Strengths:

  • Presents the results of many complex calculations that are difficult for investors to compute on their own
  • Productivity gives good insight into inflationary pressures, and how much GDP can grow without causing concurrent gains in inflation
  • Jumps in productivity tend to make their way to corporate bottom lines quickly via margin expansion
  • Release shows results with and without the effects of inflation
  • Detailed productivity measures at the industry and sector level allow investors to analyze the relative productivity performance of many of their holdings
  • One of very few indicators that shows results compared to other advanced economies; shows how the U.S. stacks up against the world in terms of productivity gains
  • Productivity results represent the lion's share of total GDP (about 75%); only government results and nonprofit groups are removed from calculations

 

Weaknesses:

  • Not timely; first report comes five weeks after the quarter, and the revised report nearly two months
  • No new series of data is released, only derivations of previous data sets
  • Can be very volatile quarter to quarter; long-term measurements are the most effective use of this indicator when analyzing sustainable, long-term rates of productivity growth

Economic Indicators: Purchasing Managers Index (PMI)
Related Articles
  1. Insights

    One Reason Jobs Shrink: Superstar Companies

    Are superstar companies that dominate their industries but employ relatively few workers to blame for labor’s falling share of GDP?
  2. Insights

    Why GDP Is Not an Accurate Measure of the Economy

    Is gross domestic product (GDP) an accurate measure of the strength or weakness of the U.S. economy?
  3. Insights

    How Is the GDP of India Calculated?

    India is a front-runner among developing economies. Investopedia explains how India calculates its GDP, an indicator of economic health and performance.
  4. Insights

    Explaining The World Through Macroeconomic Analysis

    From unemployment and inflation to government policy, learn what macroeconomics measures and how it affects everyone.
  5. Insights

    The Importance Of Inflation And GDP

    Learn the underlying theories behind these concepts and what they can mean for your portfolio.
  6. Trading

    Trading GDP Like A Currency Trader

    Investors that understand and utilize the U.S. GDP report have a significant advantage over those that don't.
  7. Insights

    Introduction To Coincident And Lagging Economic Indicators

    Investors can learn a lot, or very little, from these indicators once they know how to use them.
  8. Insights

    Why The Consumer Price Index Is Controversial

    Find out why economists are torn about how to calculate inflation.
  9. Insights

    Economic Indicators That Affect The U.S. Stock Market

    Macroeconomic factors like GDP, Inflation, and Retail Sales affect the value of your portfolio. Understanding these economic indicators is vital for every investor in the marketplace.
Frequently Asked Questions
  1. What Is a Pitchfork Indicator & How Do I Use It?

    The technical indicator known as Andrew's Pitchfork is rarely used by novice traders.
  2. What is PMI, and does everyone need to pay it?

    No – PMI is only required of those who can't make a 20% down payment on the home they're purchasing.
  3. Why is the 1982 AT&T breakup considered one of the most successful spinoffs in history?

    Find out why the breakup of AT&T into a number of spinoffs called the Baby Bells was one of the most successful spinoffs ...
  4. How does the required rate of return affect the price of a stock, in terms of the Gordon growth model?

    Find out how a change in the required rate of return adjusts the price an investor is willing to pay for a stock. Learn about ...
Trading Center