News

Bureau of Labor Statistics Washington, D.C. 20212 

United States 

Department 

of Labor 

Internet address: http://www.bls.gov/mfp USDL 09-0480 

Historical, technical For Release: 10:00 AM EDT 

information: (202) 691-5606 Wednesday, May 6, 2009 

Media contact: (202) 691-5902 

 

PRELIMINARY MULTIFACTOR PRODUCTIVITY TRENDS, 2008 

Private Business Sector and Private Nonfarm Business Sector 

Multifactor productivity, defined as output per combined units of labor and capital inputs, grew at 

an annual rate of 1.2 percent in the private business sector and 1.1 percent in the private nonfarm 

business sector for 2008, the Bureau of Labor Statistics (BLS) and the U.S. Department of Labor 

reported today. 

 2007-08 

Private business sector 1.2 

Private nonfarm business sector 1.1 

The estimates of multifactor productivity in the private business and in the private nonfarm 

business sectors for 2008 both show the largest annual rates of growth since 2005. The 2007-08 annual 

changes are summarized in tables A and B. Table B also presents data showing historical trends. 

Chart 1. Output per hour of all persons, output per unit of capital, and multifactor 

productivity in the private business sector, 1987-2008

50

70

90

110

130

150

1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

Year

Index (1987=100.0)

Multifactor productivity

Output per unit of capital

Output per hour of all persons
2

Multifactor productivity is designed to measure the joint influences of technological change, 

efficiency improvements, returns to scale, reallocation of resources, and other factors on economic 

growth while allowing for the effects of capital and labor. Multifactor productivity, therefore, differs 

from the labor productivity (output per hour worked) measures that are published quarterly by BLS 

since it includes information on capital services and other data that are not available on a quarterly basis. 

Additionally, multifactor productivity measures for the private business and private nonfarm business 

sectors account for shifts in the composition of labor. Estimates of labor composition are not included in 

the quarterly labor productivity measures. 

In private business and private nonfarm business, the change in multifactor productivity reflects 

the difference between the change in real gross domestic product for the sector and the change in labor 

and capital inputs engaged in the production of this output. The output measures for private business 

and private nonfarm business are similar to the indexes of output for business and nonfarm business 

used in the quarterly labor productivity measures differing only in that the output of government 

enterprises is omitted. 

A change in multifactor productivity reflects the change in output that cannot be accounted for by 

the change in combined inputs of labor and capital. In contrast, a change in labor productivity reflects 

the change in output that cannot be accounted for by a single factor--the change in hours of all persons 

engaged in production. 

Table A. Productivity and related data, percent changes 2007-08 

 

Private 

Business1

Private Nonfarm 

Business1

Productivity

 Multifactor productivity

2 1.2 1.1

 Output per hour of all persons 2.7 2.8

 Output per unit of capital services -2.1 -2.0

Output 0.8 0.8

Inputs

 Labor input3 -1.9 -1.8

 Hours -1.9 -2.0

 Labor composition4 -0.1 0.1

 Capital services 2.9 3.0

 Combined units of labor and capital inputs5 -0.3 -0.3

Analytic ratio:

 Capital services per hour of all persons 4.9 5.0

1

 Excludes government enterprises. 

2

 Output per unit of combined labor and capital inputs. 

3

 Index of hours at work; hours at work by education and experience group are weighted by each 

 group’s share of labor compensation. 

4

 Ratio of labor input to hours. 

5

 Labor input index combined with capital service input index, weighted by labor's and capital's 

 shares of nominal output.
3

Private business sector 

Chart 1 shows the annual indexes of multifactor productivity, output per hour worked, and output 

per unit of capital services during the 1987-2008 period for the private business sector. Over the last 21 

years, capital services have grown more rapidly than hours in private business, and the skills of workers 

-- as measured by their age and education, which implicitly measure their work experience -- also have 

risen over this period. These shifts toward more capital intensive production and toward workers with 

more human capital have supplemented labor productivity growth, usually allowing output per hour to 

grow at a faster rate than multifactor productivity. 

Multifactor productivity rose 1.2 percent for the private business sector in 2008 (see table A). 

The multifactor productivity gain in 2008 reflected a 0.8-percent increase in output and a 0.3-percent 

decrease in the combined inputs of capital and labor. 

Capital services grew 2.9 percent. Labor input posted a decrease of 1.9 percent, as both hours 

worked and labor composition fell. Labor input reflects the change in hours at work adjusted for the 

effects of changing labor composition. The decrease of labor input was due mostly to a decrease in 

hours at work of 1.9 percent and a decrease in labor composition of 0.1 percent. The capital-labor ratio 

(capital services per hour of all persons) increased by 4.9 percent. 

Labor productivity (output per hour worked) increased 2.7 percent. Capital productivity (output 

per unit of capital services) fell 2.1 percent. As shown in table B, the contribution of labor composition 

was unchanged from 2007 to 2008, while the contribution of capital intensity growth gained 1.6 percent 

over the same period. 

Historical trends in labor productivity growth can be viewed as the sum of three components: 

multifactor productivity growth, the contribution of increased capital intensity, and the contribution of 

shifts in labor composition. Chart 2 clearly shows the major changes in the relative contributions of 

multifactor productivity and of capital intensity in the latter half of the 1990s. These contributions have 

continued to be relatively high for the 2000-2007 period and for 2007-2008. 

Private nonfarm business sector

Multifactor productivity rose 1.1 percent for the private nonfarm business sector in 2008 (see table 

A). The multifactor productivity gain in 2008 reflected a 0.8-percent increase in output and a 0.3-

percent decrease in the combined inputs of capital and labor. 

Capital services grew 3.0 percent. Labor input posted a decrease of 1.8 percent, as hours worked 

declined and labor composition rose slightly. The decrease of labor input was due to a decrease of 2.0 

percent in hours at work and an increase of 0.1 percent in labor composition. The capital-labor ratio 

(capital services per hour of all persons) increased by 5.0 percent. 

Labor productivity (output per hour worked) increased 2.8 percent. Capital productivity (output 

per unit of capital services) fell 2.0 percent. The contribution of labor composition rose 0.1 percent, 

while the contribution of capital intensity growth gained 1.6 percentage points from the previous period 

(see table B). 
4

Table B. Compound average annual rates of growth in output per hour of all persons and the 

contributions of capital intensity, labor composition, and multifactor productivity, by major sector, 

selected periods, 1987-2008 

 

 (Percent per year) 

1987-

2008

1987-

1990

1990-

1995

1995-

2000

2000-

2007

2007-

2008

Private business1

Output per hour of all persons 2.2 1.6 1.5 2.7 2.6 2.7

Contribution of capital intensity2

0.9 0.6 0.6 1.2 0.9 1.6

Contribution of labor composition3

0.3 0.4 0.5 0.2 0.2 0.0

Multifactor productivity4

1.1 0.6 0.5 1.3 1.5 1.2

Private nonfarm business1

Output per hour of all persons 2.2 1.5 1.6 2.5 2.5 2.8

Contribution of capital intensity2

0.9 0.6 0.6 1.2 0.9 1.6

Contribution of labor composition3

0.3 0.4 0.5 0.2 0.2 0.1

Multifactor productivity4

1.0 0.5 0.5 1.1 1.4 1.1

1 Excludes government enterprises. 

2 Growth rate in capital services per hour multiplied by capital's share of current dollar costs. 3 Growth rate of labor composition (the growth rate of labor input less the growth rate of the hours of 

 all persons) multiplied by labor's share of current dollar costs. 

4 Output per unit of combined labor and capital inputs. 

Note: Multifactor productivity plus contribution of capital intensity and labor composition may not sum to output per 

hour due to independent rounding. 

Comprehensive tables containing additional data not included in this news release are available at 

http://www.bls.gov/mfp/mprdload.htm or in print upon request. 
5

Chart 2. Contributors to growth in output per hour, 

private business sector, selected time periods

0.9 0.6 0.6

1.2

0.9

1.6

0.3

0.4

0.2

0.2

1.1

0.6 0.5

1.3

1.5

1.2

0.5

0.0

0.5

1.0

1.5

2.0

2.5

3.0

1987-08 1987-90 1990-95 1995-00 2000-07 2007-08

Time Period

 Percentage Points

Multifactor

Productivity

Contribution of

labor composition

Contribution of

capital intensity

Note: Multifactor productivity plus contribution of capital intensity and labor composition may not sum to output per hour 

due to independent rounding. 

Notes 

While capital services by major sector are estimated for 2008, these preliminary estimates do not 

include an update of capital services by asset type. Measures of capital services through 2007 can be 

found in tables 5 and 6 of “Multifactor Productivity Trends, 2007” located at 

http://www.bls.gov/news.release/archives/prod3_03252009.pdf. 

The data in this press release reflect updated methodology that was introduced in the March 25th, 

2009 press release, “Multifactor Productivity Trends, 2007” located at 

http://www.bls.gov/news.release/archives/prod3_03252009.pdf. These data reflect updated and revised 

data sources, improved measures of rates of return on capital stock, and, to a larger extent, improved 

methodology in labor composition, described in “Changes in the Composition of Labor for BLS 

Multifactor Productivity Measures, 2007”, available at http://www.bls.gov/mfp/mprlabor.pdf. 

Summary of Methods 

The methodology for preliminary estimates is discussed in “Preliminary estimates of multifactor 

productivity growth” located at http://www.bls.gov/opub/mlr/2005/06/art3abs.htm. This release uses a 

methodology for preliminary estimates that uses data that are available shortly after the end of the 

calendar year. The methodology is a simplified version of the full methodology that BLS uses when 

more detailed information is available. Preliminary estimates for the private nonfarm business sector are 

produced using the same methodology as that used for the production of estimates for the private 

business sector; the only difference is that the farm sector is excluded. 
6

Capital Input: Capital input measures the services derived from the stock of physical assets and 

software. The assets included are computers, software, communications and other information 

processing equipment, other fixed business equipment, structures, inventories, rental residences, and 

land. Investments, depreciation, capital income, and rental prices are estimated for each of these eight 

aggregates. Rental prices reflect the nominal rates of return and the rates of economic depreciation and 

revaluation for the specific asset. Rental prices are adjusted for the effects of taxes. Data on 

investments in physical assets are obtained from the Bureau of Economic Analysis (BEA). Capital input 

measures constructed for the preliminary MFP measures are based on less detail than those for the full 

MFP measures. 

Labor Input: Labor input in private business and private nonfarm business is obtained by 

chained superlative (Tornqvist) aggregation of the hours at work by all persons, classified by age, 

education, and gender with weights determined by their shares of labor compensation. Hours paid of 

employees are largely obtained from the Current Employment Statistics program (CES). These hours of 

employees are then converted to an at-work basis by using information from the Employment Cost 

Index (ECI) of the National Compensation Survey (NCS) and the Hours at Work Survey. Hours at work 

for nonproduction and supervisory workers are derived using data from the Current Population Survey 

(CPS), the CES, and the NCS. The hours at work of proprietors, unpaid family workers, and farm 

employees are derived from the Current Population Survey. Hours at work data reflect Productivity and 

Costs data as of the March 5, 2009 news release. Therefore it reflects the benchmark revisions to the 

CES and other revisions to hours released on February 6, 2009. The preliminary estimate of the 2008 

labor composition index assumes that relative wages across groups remained constant between 2007 and 

2008. The growth rate of labor composition is defined as the difference between the growth rate of 

weighted labor input and the growth rate of the hours of all persons. Additional information concerning 

data sources and methods of measuring labor composition can be found in BLS Bulletin 2426 

(December 1993), "Labor Composition and U.S. Productivity Growth, 1948-90." 

Combined Inputs: Labor and capital input are combined using Tornqvist weights that represent 

each component's share of total costs. Total costs are defined as the value of output (Gross Product 

Originating) less a portion of taxes on production and imports. Most taxes on production and imports, 

such as excise taxes, are excluded from costs; however, property and motor vehicle taxes remain in total 

costs. The index uses changing weights: The share in each year is averaged with the preceding year's 

share. 

Output: This release presents data for the private business and private nonfarm business sectors. 

The private business sector, which accounted for approximately 77 percent of gross domestic product in 

2000, includes all of gross domestic product except the output of general government, government 

enterprises, non-profit institutions, the rental value of owner-occupied real estate, and the output of paid 

employees of private households. Additionally, the private nonfarm business sector excludes farms 

from the private business sector, but includes agricultural services. Multifactor measures exclude 

government enterprises, while the BLS quarterly Productivity and Cost series include them. 

 

Multifactor Productivity: Multifactor productivity measures describe the relationship between 

output in real terms and the inputs involved in its production. They do not measure the specific 

contributions of labor, capital, or any other factor of production. Rather, multifactor productivity is 

designed to measure the joint influences of output, capital, and labor on economic growth of 

technological change, efficiency improvements, returns to scale, reallocation of resources due to shifts in 

factor inputs across industries, and other factors. 
7

The multifactor productivity indexes for private business and private nonfarm business are derived 

by dividing an output index by an index of labor input and capital services. The output indexes are 

computed as chained superlative indexes (Fisher Ideal indexes) of components of real output. BLS 

adjusts BEA output measures to remove the output of government enterprises.
8

Table 1. Private business sector: Indexes of productivity and related measures, 1987-20081

Indexes 2000=100 

Productivity Inputs 

Year 

Output per 

hour of all 

persons 

Output 

per unit 

of capital 

Multifactor 

Productivity2 Output3

Labor

Input4

Capital 

Services5

Combined 

units of labor 

and capital6

Capital per 

hour of all 

persons 

 

1987 77.3 108.1 89.9 62.4 75.5 57.8 69.5 71.5 

1988 78.5 108.7 90.6 65.2 78.1 60.0 71.9 72.2 

1989 79.3 108.5 90.8 67.6 80.6 62.3 74.4 73.1 

1990 81.0 106.8 91.4 68.6 80.5 64.3 75.1 75.9 

1991 82.4 103.2 90.7 68.1 79.7 66.0 75.1 79.9 

1992 86.0 105.0 93.1 70.9 80.5 67.5 76.2 81.8 

1993 86.4 105.2 93.2 73.2 83.0 69.6 78.6 82.1 

1994 87.2 106.6 93.9 76.8 86.7 72.1 81.9 81.8 

1995 87.4 105.3 93.7 79.2 89.0 75.2 84.5 83.1 

1996 90.0 105.3 95.3 82.8 90.8 78.7 86.9 85.5 

1997 91.7 105.3 96.2 87.2 94.4 82.9 90.7 87.1 

1998 94.3 103.8 97.4 91.5 96.5 88.2 93.9 90.9 

1999 97.2 102.3 98.8 96.2 98.8 94.1 97.4 95.0 

2000 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 

2001 102.8 96.0 100.4 100.5 98.2 104.6 100.0 107.0 

2002 107.1 94.7 102.5 102.0 96.2 107.7 99.5 113.1 

2003 111.2 95.5 105.4 105.2 95.8 110.2 99.9 116.5 

2004 114.5 97.2 108.2 109.7 96.9 112.9 101.4 117.8 

2005 116.6 98.1 109.7 113.6 98.8 115.8 103.6 118.9 

2006 117.6 98.4 110.3 117.1 101.2 119.1 106.2 119.6 

2007 119.5 97.7 110.7 119.5 102.3 122.3 108.0 122.3 

2008 122.7 95.6 112.0 120.4 100.3 125.9 107.6 128.3 

See footnotes following table 4. Source: Bureau of Labor Statistics 
9

Table 2. Private nonfarm business sector: Indexes of productivity and related measures, 1987-20081

Indexes 2000=100 

Productivity Inputs 

Year 

Output per 

hour of all 

persons 

Output 

per unit 

of capital 

Multifactor 

Productivity2 Output3

Labor

Input4

Capital 

Services5

Combined 

units of labor 

and capital6

Capital per 

hour of all 

persons 

 

1987 78.0 110.1 90.7 62.4 74.9 56.7 68.8 70.8 

1988 79.3 111.0 91.7 65.3 77.5 58.8 71.3 71.4 

1989 79.9 110.6 91.7 67.6 80.1 61.2 73.8 72.3 

1990 81.4 108.6 92.0 68.6 80.2 63.2 74.6 75.0 

1991 82.9 104.7 91.3 68.1 79.2 65.0 74.6 79.1 

1992 86.3 106.2 93.5 70.8 80.1 66.6 75.7 81.2 

1993 86.7 106.5 93.7 73.2 82.7 68.7 78.2 81.4 

1994 87.7 107.7 94.4 76.7 86.1 71.3 81.3 81.5 

1995 88.2 106.5 94.5 79.3 88.4 74.5 83.9 82.8 

1996 90.5 106.1 95.8 82.8 90.4 78.1 86.5 85.3 

1997 92.0 105.8 96.5 87.2 94.0 82.4 90.4 86.9 

1998 94.5 104.2 97.7 91.5 96.3 87.8 93.7 90.7 

1999 97.3 102.6 99.0 96.3 98.8 93.9 97.3 94.8 

2000 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 

2001 102.7 96.0 100.4 100.5 98.4 104.7 100.2 107.0 

2002 107.1 94.5 102.5 102.1 96.4 107.9 99.6 113.2 

2003 111.1 95.2 105.2 105.2 96.0 110.5 100.0 116.7 

2004 114.2 96.9 108.0 109.6 97.1 113.1 101.5 117.8 

2005 116.1 97.7 109.3 113.5 99.1 116.1 103.8 118.9 

2006 117.2 97.9 109.9 117.1 101.6 119.6 106.6 119.7 

2007 118.9 97.0 110.1 119.4 102.8 123.1 108.4 122.6 

2008 122.3 95.1 111.4 120.4 100.9 126.7 108.1 128.8 

See footnotes following table 4. Source: Bureau of Labor Statistics 
10

Table 3. Private business sector: Compound average annual rates of growth in productivity and related 

measures, 1988-20081 

Percent per year 

Productivity Inputs 

Year 

Output per 

hour of all 

persons 

Output 

per unit 

of capital 

Multifactor 

Productivity2 Output3

Labor

Input4

Capital 

Services5

Combined 

units of labor 

and capital6

Capital per 

hour of all 

persons 

 

1988 1.6 0.5 0.8 4.4 3.4 3.9 3.5 1.1 

1989 1.0 -0.2 0.2 3.7 3.2 3.9 3.4 1.2 

1990 2.2 -1.6 0.6 1.5 -0.1 3.2 0.9 3.8 

1991 1.7 -3.3 -0.8 -0.7 -1.0 2.7 0.1 5.2 

1992 4.3 1.8 2.6 4.1 1.0 2.3 1.4 2.5 

1993 0.5 0.2 0.1 3.2 3.1 3.1 3.1 0.3 

1994 1.0 1.3 0.8 5.0 4.5 3.6 4.2 -0.4 

1995 0.2 -1.3 -0.2 3.0 2.7 4.3 3.2 1.5 

1996 2.9 0.0 1.7 4.6 2.0 4.6 2.8 2.9 

1997 1.9 0.0 0.9 5.3 3.9 5.3 4.4 1.9 

1998 2.8 -1.4 1.3 4.9 2.3 6.4 3.6 4.3 

1999 3.1 -1.4 1.4 5.2 2.4 6.7 3.7 4.5 

2000 2.9 -2.2 1.2 3.9 1.2 6.3 2.7 5.3 

2001 2.8 -4.0 0.4 0.5 -1.8 4.6 0.0 7.0 

2002 4.2 -1.4 2.1 1.5 -2.0 2.9 -0.5 5.6 

2003 3.9 0.8 2.8 3.1 -0.5 2.3 0.4 3.1 

2004 3.0 1.8 2.7 4.2 1.1 2.4 1.5 1.1 

2005 1.8 0.9 1.3 3.6 2.0 2.6 2.2 0.9 

2006 0.9 0.3 0.6 3.1 2.4 2.8 2.5 0.6 

2007 1.6 -0.7 0.4 2.1 1.1 2.7 1.7 2.3 

2008 2.7 -2.1 1.2 0.8 -1.9 2.9 -0.3 4.9 

See footnotes following table 4. Source: Bureau of Labor Statistics 
11

Table 4. Private nonfarm business sector: Compound average annual rates of growth in productivity and 

related measures, 1988-20081

Percent per year 

Productivity Inputs 

Year 

Output per 

hour of all 

persons 

Output 

per unit 

of capital 

Multifactor 

Productivity2 Output3

Labor

Input4

Capital 

Services5

Combined 

units of labor 

and capital6

Capital per 

hour of all 

persons 

 

1988 1.7 0.9 1.0 4.6 3.5 3.8 3.6 0.9 

1989 0.7 -0.4 0.0 3.5 3.3 3.9 3.5 1.2 

1990 1.9 -1.8 0.4 1.5 0.1 3.4 1.1 3.8 

1991 1.8 -3.5 -0.8 -0.8 -1.1 2.9 0.0 5.5 

1992 4.1 1.4 2.4 3.9 1.0 2.5 1.5 2.6 

1993 0.5 0.3 0.2 3.5 3.3 3.2 3.3 0.2 

1994 1.1 1.1 0.8 4.8 4.1 3.7 4.0 0.1 

1995 0.6 -1.1 0.1 3.3 2.7 4.5 3.2 1.7 

1996 2.6 -0.3 1.4 4.5 2.2 4.8 3.0 3.0 

1997 1.6 -0.3 0.7 5.2 4.0 5.5 4.5 1.9 

1998 2.8 -1.5 1.3 5.0 2.4 6.6 3.7 4.4 

1999 2.9 -1.6 1.3 5.2 2.6 6.9 3.9 4.5 

2000 2.8 -2.5 1.1 3.8 1.2 6.5 2.7 5.5 

2001 2.7 -4.0 0.4 0.5 -1.6 4.7 0.2 7.0 

2002 4.2 -1.5 2.1 1.5 -2.0 3.1 -0.6 5.8 

2003 3.7 0.7 2.6 3.1 -0.4 2.4 0.4 3.0 

2004 2.8 1.9 2.6 4.2 1.2 2.3 1.5 1.0 

2005 1.7 0.8 1.3 3.5 2.0 2.7 2.2 0.9 

2006 0.9 0.2 0.5 3.2 2.6 2.9 2.7 0.7 

2007 1.4 -0.9 0.2 2.0 1.2 2.9 1.8 2.4 

2008 2.8 -2.0 1.1 0.8 -1.8 3.0 -0.3 5.0 

See footnotes following table 4. Source: Bureau of Labor Statistics 
12

Footnotes, Tables 1-4 

Source: Output data are from the Bureau of Economic Analysis (BEA), U.S. Department of Commerce, 

and are modified by the Bureau of Labor Statistics (BLS), U.S. Department of Labor. Compensation 

and hours data are from BLS. Capital measures are based on data supplied by BEA and the U.S. 

Department of Agriculture. Also see Summary of Methods in this release. 

(1) The private business sector includes all of gross domestic product except the output of 

general government, government enterprises, non-profit institutions, the rental 

value of owner-occupied real estate, and the output of paid employees of private households. 

The private nonfarm business sector also excludes farms but includes agricultural services. 

(2) Output per unit of combined labor and capital inputs. 

(3) Gross domestic product originating in the sector, superlative chained index. 

(4) Index of hours at work of all persons including employees, proprietors, and unpaid family 

workers, classified by age, education, and gender. This superlative chain 

index is computed by combining changes in the hours of each age, education, and gender group 

weighted by each group’s share of labor compensation. 

(5) A measure of the flow of capital services used in the sector. 

(6) Labor input combined with capital input, using labor's and capital's shares of costs as weights to 

 form a superlative chained index.