- 1 - 

For release 10:00 am (EDT) Thursday, May 19, 2011 USDL-11-0723

Technical information: (202) 691-5606 • mfpweb@bls.gov • www.bls.gov/mfp 

Media contact: (202) 691-5902 • PressOffice@bls.gov 

PRELIMINARY MULTIFACTOR PRODUCTIVITY TRENDS - 2010

Private nonfarm business sector multifactor productivity increased at a 3.2 percent annual rate in 2010, the 

largest increase recorded in this series which began in 1987, the U.S. Bureau of Labor Statistics reported today. 

(See chart 1, table A.) The multifactor productivity gain in 2010 reflected a 3.7 percent increase in output and a 

0.5 percent increase in the combined inputs of capital and labor. Capital services grew by 0.6 percent, the 

smallest gain in the series which began in 1987. The combination of fast-rising output and a modest increase in

capital services caused output per unit of capital services to jump 3.0 percent, the largest gain since the series 

began in 1987. Labor input, the combined effect of hours worked and labor composition, increased 0.5 percent in 

the private nonfarm business sector after falling in the previous two years. 

Multifactor productivity measures the change in output per unit of combined capital and labor. 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, allowing for the effects of capital and 

labor. Multifactor productivity, therefore, differs from labor productivity (output per hour worked) measures that 

BLS publishes quarterly 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. 

Private business sector multifactor productivity grew by 3.2 percent in 2010, the largest gain in the series which 

began in 1987. (See table 2.) The multifactor productivity gain in 2010 reflected a 3.7 percent increase in output 

and a 0.6 percent increase in the combined inputs of capital and labor. 

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

the private nonfarm business sector, 2000-2010 

 

 

 Annual percent change

-6.0

-4.0

-2.0

0.0

2.0

4.0

6.0

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Output per hour of all persons Multifactor productivity Output per unit of capital services
- 2 - 

Historical trends in private nonfarm business 

Multifactor productivity in private nonfarm business grew 1.0 percent annually from 1987 to 2010. (See table A.) 

For the 2007-2010 period, multifactor productivity grew 0.7 percent, primarily due to a 0.4 percent decline in 

output coupled with a 1.1 percent decline in combined inputs. In contrast, the 3.2 percent increase in multifactor 

productivity in 2010 was a result of an increase in output much larger than the increase in combined inputs. The 

3.7 percent rise in output over the year represents the largest increase since 2004. (See table 1.) 

Annual labor productivity growth can be viewed as the sum of three components: multifactor productivity growth, 

the contribution of capital intensity, and the contribution of shifts in labor composition. The historical 

relationship between labor productivity growth and these three components can be seen in chart 2 and table B. 

Chart 2 shows how output per hour shifted upwards after the 1990-1995 period. In particular, the contribution of 

capital intensity to labor productivity growth became more pronounced after 1995. 

For the 2007-2010 period, the contribution of capital intensity increased at a 1.6 percent annual rate and the 

contribution of labor composition increased at a 0.4 percent annual rate, faster than the gains seen in the 1995-

2000 and 2000-2007 periods. Gains made in private nonfarm business output per hour due to the rising 

contributions of capital intensity and of labor composition were tempered by slower multifactor productivity 

growth. As a result, output per hour was little changed during 2007-2010 compared to the two previous periods. 

(See chart 2, table B.) 

The methodology for measuring preliminary multifactor productivity for 2010 is a simplified version of the 

methodology that BLS uses when more detailed information is available. Measures will be revised in early 2012. 

Chart 2. Percentage point contributions to growth in output per hour in the private nonfarm business 

sector, 1987-2010 

Annual percent change

Multifactor productivity plus the contributions of capital intensity and labor composition may not sum to output per 

hour due to independent rounding. 

1.0

0.6 0.6

1.2 1.0

1.6

0.3

0.4 0.5

0.2

0.2

1.0 0.4

0.5 0.5

1.3

1.4

0.7

0.0

0.5

1.0

1.5

2.0

2.5

3.0

1987-2010 1987-1990 1990-1995 1995-2000 2000-2007 2007-2010

Contribution of capital intensity Contribution of labor composition Multifactor productivity
- 3 - 

Table A. Compound annual growth rates for productivity, output, and inputs in the private nonfarm 

business and private business sectors for selected periods, 1987-2010

In percent 

1987-

2010

1987-

1990

1990-

1995

1995-

2000

2000-

2007

2007-

2010

2009-

2010

Private nonfarm business1

Productivity

 Multifactor Productivity21.0 0.5 0.5 1.3 1.4 0.7 3.2

 Output per hour of all persons 2.3 1.4 1.6 2.8 2.6 2.8 3.6

 Output per unit of capital services -0.8 -0.4 -0.4 -1.0 -0.5 -1.9 3.0

Output 2.9 3.2 2.9 5.0 2.7 -0.4 3.7

Inputs

 

 Combined inputs3

1.9 2.7 2.4 3.6 1.3 -1.1 0.5

 Labor Input4

1.1 2.3 2.0 2.5 0.4 -2.5 0.5

 Hours 0.6 1.7 1.3 2.2 0.1 -3.1 0.1

 Labor composition5

0.5 0.6 0.7 0.3 0.3 0.6 0.4

 Capital services 3.7 3.6 3.3 6.0 3.2 1.5 0.6

Analytic ratio

 Capital services per hour of all 

 persons 3.1 1.9 1.9 3.8 3.2 4.7 0.4

Private business1

Productivity

 Multifactor Productivity21.0 0.6 0.4 1.5 1.5 0.8 3.2

 Output per hour of all persons 2.3 1.6 1.5 2.9 2.7 2.8 3.6

 Output per unit of capital services -0.6 -0.4 -0.3 -0.7 -0.4 -1.8 3.0

Output 2.9 3.2 2.8 5.0 2.7 -0.3 3.7

Inputs

 

 Combined inputs3

1.8 2.6 2.4 3.4 1.2 -1.1 0.6

 Labor Input4

1.0 2.1 2.0 2.3 0.3 -2.5 0.5

 Hours 0.5 1.6 1.3 2.0 0.0 -3.0 0.1

 Labor composition5

0.5 0.6 0.7 0.3 0.3 0.6 0.3

 Capital services 3.5 3.6 3.1 5.8 3.1 1.4 0.6

Analytic ratio

 Capital services per hour of all 

 persons 3.0 2.0 1.8 3.7 3.1 4.6 0.5

1 Excludes government enterprises. 

2 Output per unit of combined labor input and capital services. 

3 The growth rate of each input is weighted by its share of current dollar costs.

4 Hours at work by age, education, and gender group are weighted by each group’s share of the total wage bill. 

5 Ratio of labor input to hours. 
- 4 - 

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

capital intensity, labor composition, and multifactor productivity in the private nonfarm business and 

private business sectors for selected periods, 1987-2010 

In percent 

1987-

2010

1987-

1990

1990-

1995

1995-

2000

2000-

2007

2007-

2010

2009-

2010

Private nonfarm business1

Output per hour of all persons 2.3 1.4 1.6 2.8 2.6 2.8 3.6

 Contribution of capital 

 intensity21.0 0.6 0.6 1.2 1.0 1.6 0.2

 Contribution of labor 

 composition30.3 0.4 0.5 0.2 0.2 0.4 0.2

 Multifactor productivity4 1.0 0.5 0.5 1.3 1.4 0.7 3.2

Private business1

Output per hour of all persons 2.3 1.6 1.5 2.9 2.7 2.8 3.6

 Contribution of capital 

 intensity21.0 0.6 0.6 1.2 1.0 1.6 0.2

 Contribution of labor 

 composition30.3 0.4 0.5 0.2 0.2 0.4 0.2

 Multifactor productivity4

1.0 0.6 0.4 1.5 1.5 0.8 3.2

 1 Excludes government enterprises.

 2 Capital services per hour multiplied by capital's share of current dollar costs.

 3 Labor composition multiplied by labor's share of current dollar costs.

 4 Output per unit of combined labor input and capital services.

Multifactor productivity plus the contributions of capital intensity and labor composition may not sum to output per 

hour due to independent rounding. 
- 5 - 

Technical Notes 

The simplified methodology for preparing preliminary estimates of MFP is outlined in the June 

2005 Monthly Labor Review article, “Preliminary estimates of multifactor productivity growth” located 

at http://www.bls.gov/opub/mlr/2005/06/art3abs.htm. This methodology is applied to both the private 

nonfarm business and private business sectors and measures are calculated only for the most recent year. 

Measures for all previous years are not different from the March 30, 2011 “Multifactor Productivity 

Trends” news release (USDL-11-0435).

Capital Services: Capital services are the services derived from the stock of physical assets and 

software. Capital services measures constructed for the preliminary MFP measures are based on less 

detail only for the most recent year. The preliminary measures consist of eight asset types as opposed to 

the 86 asset types for fixed business equipment and software, structures, inventories, and land included 

in estimates for all previous years. The assets included in the preliminary estimates are computers, 

software, communications and other information processing equipment, other fixed business equipment, 

structures, inventories, rental residences, and land. Investments, depreciation, and capital income are 

estimated for each of these eight aggregates. Capital services are calculated by a chained superlative 

Tornqvist index combining stocks of the eight asset categories, weighted by capital income shares. 

Labor Input: Labor input is composed of hours worked and labor composition for the private business 

and private nonfarm business sectors. It is calculated by the chained superlative Tornqvist aggregation 

of the hours at work by all persons, classified by age, education, and gender with weights determined by 

each group’s share of the total wage bill. The preliminary estimates of 2010 hours worked for the 

private nonfarm business and private business sectors are extrapolated from the hours worked reported 

in the nonfarm business and business sectors, respectively, in the February 3, 2011 “Productivity and 

Costs” news release (USDL-11-0128). 

The labor composition index estimates the effect of shifts in the age, education, and gender 

composition of the work force on the efficiency of hours worked. The preliminary MFP labor 

composition index calculates the number of hours worked by each type of worker based on Current 

Population Survey (CPS) data. The estimate of the 2010 labor composition index assumes relative 

wages across groups remain constant between 2009 and 2010. 

Additional information concerning data sources and methods of measuring labor composition 

can be found in Cindy Zoghi, 2007, “Measuring Labor Composition: A Comparison of Alternate 

Methodologies” http://www.bls.gov/bls/fesacp1121407.pdf. 

Combined Inputs: Labor input and capital services are combined using chained superlative Tornqvist 

aggregation, applying weights that represent each component's share of total costs. The chained 

superlative Tornqvist index uses changing weights; the share in each year is averaged with the preceding 

year's share. Total costs are defined as the value of output less a portion of taxes on production and 

imports. Most of the taxes on production and imports, such as excise taxes, are excluded from costs; 

however, property and motor vehicle taxes remain in total costs. 
- 6 - 

Capital Intensity: Capital intensity is the ratio of capital services to hours worked in the production 

process. The higher the capital to hours ratio, the more capital intensive the production process is. 

In a production process, profit maximizing/cost-minimizing firms adjust the factor proportions of 

capital and labor if the price of one factor is less than the other factor; there would be a tendency for the 

firms to substitute the less expensive factor for the more expensive one. In the short run, changes in 

hours worked are more variable than changes in capital services. Changes in hours worked in business 

cycles can result in volatility of capital intensity over short periods of time. In the long run an increase 

in wages relative to the price of capital will induce the firm to substitute capital for labor, resulting in an 

increase in capital intensity. 

Rising labor costs are, in fact, an incentive for firms to introduce automated production processes. 

Industry estimates of capital to hours ratios can be obtained at http://www.bls.gov/mfp/mprdload.htm. 

Output: Private business sector output is a chain-type, current-weighted index constructed after 

excluding the following outputs from gross domestic product (GDP): general government, nonprofit 

institutions, private households (including owner-occupied housing), and government enterprises. This 

release presents data for the private business and private nonfarm business sectors. The private business 

sector accounted for approximately 76 percent of gross domestic product in 2005. Additionally, the 

private nonfarm business sector excludes farms from the private business sector, but includes 

agricultural services. Multifactor productivity measures exclude government enterprises, while the BLS 

quarterly Productivity and Cost series include them. The output measures reflect the National Income 

and Product Accounts (NIPA) data released by the Bureau of Economic Analysis (BEA) on January 28, 

2011 but do not reflect the revised data released by BEA on February 25, 2011. The preliminary 

estimates of 2010 output for the private nonfarm business and private business sectors are extrapolated 

from the output reported in the nonfarm business and business sectors, respectively, in the February 3, 

2011 “Productivity and Costs” news release (USDL-11-0128). 

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 technological change, efficiency improvements, returns to scale, 

reallocation of resources, and other factors on economic growth, allowing for the effects of capital and 

labor.

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.
- 7 - 

Table 1. Private nonfarm business sector: productivity and related measures for the 1987-20101 period 

Annual percent change from previous year 

Productivity Inputs

Year

Output 

per hour 

of all 

persons

Output 

per unit 

of 

capital

services

Multifactor 

Productivity2 Output3

Labor

Input4

Capital

Services5

Combined 

units of 

labor input 

and 

capital

services6

Capital 

services

per hour 

of all 

persons

1988 1.7 0.9 1.0 4.6 3.5 3.6 3.5 0.7

1989 0.8 -0.4 0.0 3.5 3.3 4.0 3.5 1.2

1990 1.9 -1.7 0.4 1.4 0.1 3.2 1.1 3.7

1991 1.7 -3.6 -1.0 -0.9 -1.1 2.9 0.1 5.5

1992 4.0 1.5 2.3 3.8 1.0 2.3 1.4 2.5

1993 0.6 0.3 0.3 3.6 3.3 3.2 3.3 0.3

1994 1.1 1.1 0.7 4.7 4.1 3.6 3.9 0.0

1995 0.5 -1.1 0.0 3.3 2.7 4.4 3.2 1.6

1996 2.6 -0.3 1.4 4.4 2.2 4.8 3.0 2.9

1997 1.5 -0.4 0.6 5.1 4.0 5.5 4.5 1.9

1998 2.9 -1.2 1.5 5.2 2.4 6.4 3.6 4.1

1999 3.3 -1.1 1.7 5.6 2.6 6.8 3.9 4.5

2000 3.4 -1.9 1.6 4.5 1.2 6.5 2.8 5.5

2001 3.1 -3.7 0.7 1.0 -1.6 4.9 0.3 7.1

2002 4.7 -1.4 2.4 1.9 -2.0 3.4 -0.4 6.1

2003 3.7 0.3 2.4 3.1 -0.4 2.8 0.6 3.4

2004 2.8 1.6 2.5 4.2 1.2 2.5 1.6 1.1

2005 1.6 0.4 1.1 3.4 2.0 3.0 2.3 1.2

2006 0.9 0.0 0.4 3.2 2.5 3.2 2.8 1.0

2007 1.7 -0.7 0.4 2.2 1.2 3.0 1.8 2.4

2008 1.1 -3.8 -1.0 -1.1 -1.5 2.8 -0.1 5.1

2009 3.7 -4.7 0.1 -3.7 -6.3 1.1 -3.8 8.8

2010 3.6 3.0 3.2 3.7 0.5 0.6 0.5 0.4

See footnotes following table 4. Source: Bureau of Labor Statistics 
- 8 - 

Table 2. Private business sector: productivity and related measures for the 1987-20101 period 

Annual percent change from previous year 

Productivity Inputs

Year

Output 

per hour 

of all 

persons

Output 

per unit 

of 

capital

services

Multifactor 

Productivity2 Output3

Labor

Input4

Capital

Services5

Combined 

units of 

labor input 

and 

capital

services6

Capital 

services 

per hour 

of all 

persons

1988 1.5 0.5 0.8 4.3 3.4 3.8 3.5 1.0

1989 1.0 -0.2 0.3 3.7 3.2 3.9 3.5 1.2

1990 2.2 -1.5 0.6 1.5 -0.1 3.0 0.9 3.7

1991 1.6 -3.4 -1.0 -0.8 -1.0 2.7 0.2 5.2

1992 4.2 1.8 2.6 4.0 1.0 2.1 1.4 2.3

1993 0.6 0.2 0.2 3.3 3.1 3.1 3.1 0.4

1994 0.9 1.4 0.7 5.0 4.5 3.5 4.2 -0.4

1995 0.1 -1.2 -0.3 2.9 2.7 4.2 3.2 1.4

1996 2.9 0.0 1.7 4.6 2.0 4.6 2.8 2.9

1997 1.8 -0.1 0.8 5.2 3.9 5.3 4.4 1.8

1998 3.0 -1.1 1.5 5.0 2.3 6.2 3.5 4.1

1999 3.5 -0.9 1.9 5.6 2.4 6.6 3.7 4.5

2000 3.5 -1.7 1.7 4.6 1.2 6.3 2.8 5.3

2001 3.2 -3.6 0.8 0.9 -1.8 4.8 0.2 7.1

2002 4.6 -1.3 2.3 2.0 -1.9 3.3 -0.4 5.9

2003 3.9 0.5 2.6 3.1 -0.4 2.7 0.5 3.4

2004 2.9 1.6 2.6 4.2 1.1 2.5 1.6 1.3

2005 1.6 0.4 1.1 3.4 2.0 3.0 2.3 1.2

2006 1.0 0.2 0.5 3.1 2.4 2.9 2.6 0.8

2007 1.6 -0.8 0.3 2.1 1.2 2.9 1.8 2.4

2008 1.2 -3.6 -0.9 -0.9 -1.5 2.7 0.0 4.9

2009 3.7 -4.5 0.2 -3.6 -6.3 1.0 -3.8 8.6

2010 3.6 3.0 3.2 3.7 0.5 0.6 0.6 0.5

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

Table 3. Private nonfarm business sector: indexes of productivity and related measures, 1987-20101

Indexes 2005=100 

Productivity Inputs

Year

Output 

per hour 

of all 

persons

Output 

per unit 

of 

capital

services

Multifactor 

Productivity2 Output3

Labor

Input4

Capital

Services5

Combined 

units of 

labor input 

and 

capital

services6

Capital 

services 

per hour 

of all 

persons

1987 66.2 111.6 82.3 54.2 75.6 48.6 65.9 59.4

1988 67.3 112.6 83.2 56.7 78.2 50.4 68.2 59.8

1989 67.8 112.1 83.2 58.7 80.8 52.4 70.6 60.5

1990 69.1 110.2 83.5 59.6 80.8 54.1 71.4 62.8

1991 70.3 106.2 82.7 59.0 79.9 55.6 71.4 66.2

1992 73.1 107.8 84.6 61.3 80.7 56.9 72.4 67.8

1993 73.6 108.1 84.9 63.5 83.4 58.7 74.8 68.0

1994 74.3 109.3 85.5 66.5 86.9 60.8 77.8 68.0

1995 74.7 108.1 85.5 68.7 89.2 63.5 80.3 69.1

1996 76.6 107.7 86.7 71.7 91.1 66.6 82.7 71.1

1997 77.8 107.3 87.2 75.4 94.8 70.2 86.5 72.5

1998 80.1 106.1 88.5 79.3 97.1 74.7 89.6 75.5

1999 82.7 104.9 89.9 83.7 99.6 79.8 93.1 78.9

2000 85.5 102.9 91.4 87.5 100.8 85.0 95.7 83.2

2001 88.2 99.1 92.0 88.4 99.2 89.2 96.0 89.0

2002 92.3 97.7 94.2 90.1 97.2 92.2 95.6 94.5

2003 95.7 98.0 96.5 92.8 96.9 94.7 96.2 97.7

2004 98.4 99.6 98.9 96.7 98.1 97.1 97.7 98.8

2005 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0

2006 100.9 100.0 100.4 103.2 102.5 103.2 102.8 101.0

2007 102.6 99.2 100.8 105.5 103.8 106.3 104.6 103.4

2008 103.8 95.4 99.8 104.3 102.2 109.3 104.6 108.7

2009 107.6 90.9 99.9 100.5 95.8 110.5 100.6 118.3

2010 111.4 93.7 103.0 104.2 96.3 111.1 101.1 118.8

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

Table 4. Private business sector: indexes of productivity and related measures, 1987-20101

Indexes 2005=100 

Productivity Inputs

Year

Output 

per hour 

of all 

persons

Output 

per unit 

of 

capital

services

Multifactor 

Productivity2 Output3

Labor

Input4

Capital

Services5

Combined 

units of 

labor input 

and 

capital

services6

Capital 

services 

per hour 

of all 

persons

1987 65.4 109.1 81.3 54.2 76.4 49.6 66.6 59.9

1988 66.4 109.7 82.0 56.5 78.9 51.5 68.9 60.5

1989 67.1 109.5 82.2 58.6 81.5 53.5 71.3 61.3

1990 68.6 107.9 82.7 59.5 81.4 55.2 72.0 63.6

1991 69.7 104.2 81.9 59.0 80.6 56.7 72.1 66.9

1992 72.6 106.1 84.0 61.4 81.4 57.9 73.1 68.4

1993 73.0 106.3 84.1 63.4 83.9 59.7 75.4 68.7

1994 73.7 107.8 84.8 66.6 87.7 61.8 78.5 68.4

1995 73.8 106.4 84.5 68.5 90.0 64.3 81.0 69.3

1996 75.9 106.5 86.0 71.6 91.8 67.3 83.3 71.3

1997 77.3 106.4 86.7 75.3 95.4 70.8 86.9 72.6

1998 79.6 105.2 88.0 79.2 97.6 75.2 90.0 75.6

1999 82.4 104.2 89.6 83.6 99.9 80.2 93.3 79.0

2000 85.3 102.5 91.2 87.4 101.1 85.3 95.9 83.2

2001 88.0 98.8 91.8 88.2 99.3 89.3 96.1 89.1

2002 92.1 97.5 94.0 90.0 97.4 92.2 95.7 94.4

2003 95.6 98.0 96.5 92.8 97.0 94.7 96.2 97.6

2004 98.4 99.6 98.9 96.7 98.1 97.1 97.7 98.8

2005 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0

2006 101.0 100.2 100.5 103.1 102.4 102.9 102.6 100.8

2007 102.6 99.4 100.9 105.3 103.6 106.0 104.4 103.3

2008 103.8 95.8 99.9 104.3 102.1 108.8 104.4 108.3

2009 107.6 91.5 100.2 100.6 95.6 109.9 100.4 117.6

2010 111.4 94.2 103.3 104.3 96.1 110.6 101.0 118.2

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

Footnotes, Tables 1-4

Source: The Bureau of Labor Statistics (BLS) develops productivity measures using output and 

compensation data published by the Bureau of Economic Analysis (BEA), hours data published by other 

BLS programs, and capital data supplied by BEA and U.S. Department of Agriculture. Also see 

Technical Notes 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 input and capital services. 

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

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

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

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

weighted by each group’s share of the total wage bill. 

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

 derived from the stock of physical assets and software. The assets included are fixed business 

 equipment, structures, inventories, and land.

(6) The growth rates of labor input and capital services are combined by weighting with their respective 

 shares of current dollar costs, and aggregating into a chained superlative index.