1

New Service Industry

Productivity Measures

U.S. Department of Labor

Bureau of Labor Statistics

September 2004

Report 979

The Bureau of Labor Statistics (BLS) has developed

labor productivity measures and related series for three

service industries—video tape and disc rental (NAICS

53223), travel agencies (NAICS 56151), and janitorial services (56172). The introduction of these measures reflects

the ongoing BLS effort to expand productivity measurement

in the service-producing sector. This report discusses developments in the new measures over the period 1987 through

2002.

Labor productivity, output, and hours increased in all three

industries between 1987 and 2002. (See table 1.) Among the

three industries, productivity growth was most rapid in the

video tape and disc rental industry, where output per hour

grew by 4.0 percent per year, on average. Productivity grew

the slowest in travel agencies, at an average annual rate of

1.6 percent per year. For all three industries, productivity

and output increased in both of the subperiods (1990-95 and

1995-2000) shown in table 1. In travel agencies and especially in the janitorial services industry, output and output

per hour growth accelerated in the later period. In the video

tape and disc rental industry, however, productivity and output growth slowed slightly.

 Unit labor costs grew inversely to labor productivity for

all three industries. Unit labor costs declined at an average

annual rate of -1.9 percent over the 1987-2002 period in the

video tape and disc rental industry, where productivity

growth was the strongest. Unit labor costs increased most

rapidly in travel agencies, rising 3.8 percent per year on average between 1987 and 2002, and increased at a slower rate of

0.5 percent per year over the period in the janitorial services

industry.

Industry developments

The video tape and disc rental industry recorded an average

gain of 4.0 percent per year in labor productivity (output per

hour) over the 1987-2002 period. This increase reflected a

rapid growth in output of 7.2 percent per year on average,

and a more moderate increase of 3.1 percent per year in hours.

After posting productivity increases averaging 4.4 percent

per year from 1990 to 1995, output per hour in the video tape

and disc rental industry grew at a slightly lower rate of 4.1

percent per year during the 1995-2000 period. Output growth

also slowed minimally from 6.3 to 6.1 percent per year, on

average, while growth in hours rose marginally from 1.8 percent per year to 1.9 percent per year. Growth in video tape

and disc rental output continued to slow after 2000, and

declined in 2002. Growth in the video-by-mail segment of the

industry, however, has continued to increase.

Output per hour in the travel agencies industry increased

1.6 percent per year from 1987 to 2002, reflecting an annual

average rise in output of 2.0 percent and an average annual

increase in hours of 0.4 percent. This modest growth masked

different trends in the 1990-95 and 1995-2000 periods. From

1990 to 1995, productivity in the industry increased at a rate

of 0.2 percent per year. The increase in output of 2.4 percent

per year during this period was largely offset by the rate of

growth in hours of 2.1 percent per year. From 1995 to 2000,

however, productivity increased more rapidly, rising at an

average annual rate of 2.9 percent. The productivity growth

was driven by output growth of 3.0 percent per year with

only a 0.1 percent per year growth in hours. The industry

composition shifted in the late 1990s, as the share of very

small establishments declined and Internet-only firms gained

market share. The operations of Internet-only firms require

less labor partly because the firms do not need to staff local

offices. The terrorist attacks in 2001 precipitated a significant drop in air travel, adversely affecting travel agencies,

as output fell by 13.1 percent and hours by 7.0 percent that

year. In 2002, the decline in hours accelerated (-13.1 percent), as output fell again (-0.4 percent), leading to an increase in productivity of 14.7 percent.

Output per hour in the janitorial services industry increased at an average annual rate of 3.5 percent per year

between 1987 and 2002, reflecting an average annual increase

in output of 5.5 percent and an average gain in hours of 2.0

percent per year. From 1990 to 1995, productivity grew slowly,

at an average annual rate of 0.8 percent per year. In this

period, hours fell 0.1 percent and output rose 0.7 percent per

year on average. Between 1995 and 2000, however, productivity in the janitorial services industry accelerated to a rapid

6.1 percent per year. Output grew strongly, 8.5 percent per

year, while hours increased 2.2 percent per year. In 2002,

productivity rose 1.1 percent as output increased 1.6 percent

and hours rose 0.5 percent.
2

53223 Video tape and disc rental 4.0 7.2 3.1 -1.9 -1.9 -1.4 0.4 3.6

56151 Travel agencies 1.6 2.0 .4 3.8 14.7 -.4 -13.1 -5.9

56172 Janitorial services 3.5 5.5 2.0 .5 1.1 1.6 .5 -.1

53223 Video tape and disc rental 4.4 6.3 1.8 -1.5 4.1 6.1 1.9 -0.6

56151 Travel agencies .2 2.4 2.1 3.3 2.9 3.0 .1 3.5

56172 Janitorial services .8 .7 -.1 1.6 6.1 8.5 2.2 -1.7

1987-2002 2001-2002

Output

per

hour

Output Hours Output

Output

per

hour

Hours

Unit

labor

cost

Unit

labor

cost

1990-1995 1995-2000

Output

per

hour

Output Hours Output

Output

per

hour

Hours

Unit

labor

cost

Unit

labor

cost

NAICS

code

NAICS

code Industry

Table 1. Average annual percent change in output per hour and related series for selected service industries, selected

periods 1987-2000

Industry
3

Table 2. Annual indexes of productivity, output, hours, and unit labor costs for selected service industries, 1987-2002

(1997=100)

1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002

53223 Video tape and disc rental

Output per hour................................. 76.6 90.5 90.1 92.6 89.7 100.7 109.3 117.5 115.0 102.3 100.0 116.6 134.1 140.7 141.6 139.0Output ................................................ 49.8 62.8 70.4 77.5 75.1 79.9 88.9 101.0 105.5 98.8 100.0 115.2 135.1 141.5 144.3 142.2Hours ................................................. 65.0 69.4 78.1 83.7 83.7 79.3 81.3 86.0 91.7 96.6 100.0 98.8 100.7 100.5 101.9 102.3

Unit labor cost ................................... 109.4 86.7 89.5 91.5 96.9 92.8 90.0 81.4 84.8 93.2 100.0 91.0 80.7 82.2 79.1 081.9

56151 Travel agencies

Output per hour................................. 90.1 92.4 91.8 91.1 85.1 89.3 86.1 89.0 92.2 98.6 100.0 98.9 105.0 106.5 99.4 114.0

Output ................................................ 64.7 69.4 74.4 77.1 70.0 74.1 74.4 77.8 86.7 96.0 100.0 99.8 107.2 100.5 87.3 086.9Hours ................................................. 71.8 75.1 81.1 84.7 82.3 82.9 86.5 87.5 94.1 97.4 100.0 100.9 102.1 94.4 87.8 076.3Unit labor cost ................................... 71.1 74.2 79.0 83.7 92.7 92.9 100.2 99.9 98.6 95.9 100.0 106.9 102.4 116.9 131.7 124.0

56172 Janitorial services

Output per hour................................. 72.9 74.8 84.6 87.2 86.8 93.2 86.5 87.7 90.9 96.5 100.0 111.1 113.4 122.2 120.1 121.4

Output ................................................ 59.2 66.2 77.1 82.9 79.4 81.4 77.6 83.5 86.0 94.0 100.0 110.9 118.9 129.1 131.0 133.0

Hours ................................................. 81.2 88.4 91.1 95.2 91.5 87.4 89.6 95.2 94.6 97.4 100.0 99.9 104.8 105.6 109.0 109.5

Unit labor cost ................................... 89.9 94.6 89.9 93.7 96.6 93.4 102.4 100.6 101.7 100.5 100.0 95.5 94.3 93.1 96.3 096.2

NAICS

code Industry
4

The output indexes for the industries included in this report

are based on current-dollar industry revenues. The industry

revenues, which are published by the U.S. Census Bureau,

are deflated with price measures from various sources. Annual current-dollar revenues for travel agencies are from the

Transportation Annual Survey through 1996 and the Service Annual Survey from 1997 forward. Annual revenues for

the video tape and disc rental and janitorial services industries are from the Service Annual Survey. These data are

benchmarked every 5 years (in 1987, 1992, and 1997) to data

from the Census Bureau’s Census of Transportation Industries or Census of Service Industries. The indexes of output

used in measuring labor productivity and unit labor costs

are, whenever possible, calculated with a Tornqvist formula.

This formula aggregates the growth rates of the various industry products between two periods using the products’

shares in industry value of production, averaged over the

two periods, as weights.

The revenue series for the industries included in this report were deflated primarily using BLS price measures. For

the video tape and disc rental industry, research series consumer price indexes (CPI-U-RS) were used to deflate receipts

data prior to 1997. Beginning in 1997, detailed receipts data

were deflated using a combination of research series consumer price indexes and newly available BLS special relative

calculation (SRC) indexes.

Producer price indexes (PPIs) were used to deflate the

revenue series for travel agencies and the janitorial services

industry for much of the period covered by this study. Beginning in 1997, detailed receipts data were deflated with

matching PPIs. In earlier years, total revenues were deflated

with an aggregate producer price index. The PPIs, however,

do not cover the entire period for either of these industries,

and they are extrapolated backward for the early years of the

period using movements in alternative related series. For

travel agencies, an aggregate producer price index is available

beginning in 1990. The index is extrapolated back to 1987 using

changes in the average hourly earnings of nonsupervisory

workers. An aggregate producer price index for janitorial services begins in 1995. This PPI was extrapolated back to 1987

using changes in a weighted combination of CPIs.

The indexes of labor input are all-worker-hour indexes,

representing the hours of all employees, the self-employed,

and unpaid family workers. These indexes are developed

primarily with data from the BLS Current Employment Statistics survey (a monthly survey of establishments) and the

Current Population Survey (a monthly household survey

conducted by the Census Bureau for BLS). Because of data

limitations, all hours are treated as homogenous and additive, with no distinction made between hours of different

groups of workers.

The industry productivity measures describe the relationship between output and the labor time involved in its production. They show the changes from period to period in

the amount of goods and services produced per hour. Although these measures relate output to hours of all workers

engaged in an industry, they do not measure the specific

contribution of labor. Rather, they reflect the joint effects of

many influences, including changes in technology; capital

investment; utilization of capacity, energy, and materials; the

organization of production; managerial skill; and the characteristics and effort of the workforce.

Year-to-year movements in productivity measures for

some industries might be somewhat erratic, particularly in

the smaller industries. The annual changes in an industry’s

productivity are based on sample data, which are likely to

differ from data that would be generated by a census of

establishments in the industry. As a result, long-term trends

tend to be more reliable indicators of the performance of an

industry than are the year-to-year changes.

The unit labor cost series represent labor compensation

costs per unit of output produced, and are computed by

dividing an index of labor compensation by an index of output. Labor compensation includes payroll as well as supplemental benefits (both legally required expenditures and payments for voluntary programs). For the industries included

in this report, labor compensation measures were calculated

using data from the BLS Quarterly Census of Employment

and Wages (ES-202) program, adjusted with data on employer

costs for fringe benefits from the Census of Service Industries and the Census of Transportation Industries.

Published productivity and unit labor cost data for selected NAICS industries are available on the Internet at http:/

/www.bls.gov/lpc/home.htm. Productivity and labor costs

series for additional industries are available but not published. Unpublished data can be requested by phoning 202-

691-5618 or by sending e-mail to dipsweb@bls.gov.

Material in this report is in the public domain and, with

appropriate credit, may be used without permission. This

information is available to sensory impaired individuals upon

request. Voice phone: 202-691-5200; Federal Relay Service:

1-800-877-8339.

Technical Note