Productivity in industry and government, 1990

Monthly Labor Review, June, 1992 by Mark W. Dumas

As part of its productivity measurement program, the Bureau of Labor Statistics estimates movements in labor and multifactor productivity for a variety of manufacturing and nonmanufacturing industries, as well as changes in Federal, State, and local government productivity. Recently, labor productivity measures were extended through 1990, industry multifactor measures through 1989, and Federal, State, and local government measures through fiscal year 1990. The results of these extensions are presented in this research summary. [1]

Table 1 shows average annual percent changes in labor productivity for selected industries covering the long term (from the initial year listed to 1989 or 1990) and from 1985 to 1989 or 1990, as well percent changes from 1988 to 1989 and from 1989 to 1990. The table includes, for the first time, a labor productivity measure for crude petroleum and natural gas production.2 Table 2 shows average annual percent changes in multifactor productivity and related data for selected industries, covering the periods 1958-89, 1985-89, and 1988-89. This table includes a new measure for the railroad transportation industry.3 In table 3, average annual percent changes in productivity covering the long term, 1985-90, and 1989-90 are given for the Federal Government. Indexes for most of the industry labor productivity measures for selected years between 1973 and 1990 are shown in table 46 of the section, "Current Labor Statistics," in each issue of the Monthly Labor Review.

Labor productivity

Current trends. Productivity, as measured by output per employee hour, increased in 1990 in 57 percent of the industries for which data are currently available.4 Similar movements were observed in 1989, when 53 percent of the same industries experienced increased productivity. Output trended downward in 1990, however: sixty-two percent of the measured industries experienced declining output, compared with 48 percent a year earlier.

Manufacturing. More industries posted productivity gains in 1990 than in 1989, largely because of the performance of the manufacturing sector. Sixtytwo percent of the manufacturing industries experienced productivity gains in 1990, compared with 51 percent in 1989. Output trends for the manufacturing sector nearly matched those of all industries, with 66 percent posting declines in 1990, while 51 percent showed declines in 1989.

The steel industry, reversing declines posted in the previous year, registered increases in both productivity and output. Productivity grew 3.3 percent, the result of an increase in capacity utilization and the continued diffusion of labor-saving processing techniques, such as continuous casting. Output rose about 2 percent, driven by growth in exports and demand from the oil and gas sector.

Several other manufacturing industries exhibited increases in productivity in 1990: farm machinery (10.1 percent), malt beverages and metal cans (7.7 percent each), glass containers (6.9 percent), and bottled and canned soft drinks (6.6 percent). The farm machinery industry benefited from the strength of the agncultural sector, where farm capital spending continued to rise. Productivity in the malt beverage and bottled and canned soft drink industries has been enhanced by more efficient plants and improved processing techniques. Growth in the malt beverage and soft drink industries, in turn, has been beneficial to the metal can industry and, to a lesser extent, the glass container industry.

One closely watched manufacturing industry, motor vehicles, had a decline in productivity of 0.5 percent, the second straight year that productivity in the industry dropped. Output fell 8.4 percent, largely the result of declines in the number of passenger cars and trucks produced, while employee hours decreased 7.9 percent, the largest drop in the industry since 1982.

Other industries in the manufacturing sector also experienced declines in productivity. Both lawn and garden equipment and rice milling had decreases of about 9 percent. Performance in these industties was hampered by the economic slowdown. Productivity declined nearly 8 percent in the oil and gas field machinery industry, even as orders for custommanufactured drilling equipment increased. The labor-intensive nature of the manufacturing process drove employee hours up faster than output.

Mining. The number of industries reporting productivity growth in the mining sector remained unchanged in 1990. Non metallic mineral mining and coal mining both recorded their second straight year of productivity increases, while productivity in the oil and gas production, copper mining, and iron mining industries fell. Iron mining had the largest productivity decline of the industries measured in 1990, dropping 9.3 percent. Output decreased about 4 percent, in part because labor unrest resulted in mine closures. In contrast, copper mining, with a 2'3'percent drop in productivity, had a relatively high increase in output, 5.4 percent. Producers, encouraged by high copper prices, have reopened older mines that are less rich in ores. Thus, more labor time is expended on less productive operations, in an effort to increase total output.