Internet address: http://www.bls.gov     USDL 04-1945
Technical information: (202) 691-5654    For Release: 10:00 A.M. EDT
Media contact: (202) 691-5902            Thursday, September 30, 2004

INTERNATIONAL COMPARISONS OF MANUFACTURING PRODUCTIVITY AND UNIT 
LABOR COST TRENDS, 2003

    The increase in U.S. manufacturing productivity in 2003 was the 
second highest (+6.8 percent) among the 14 economies compared, 
according to the U.S. Department of Labor's Bureau of Labor 
Statistics.  Korea registered the largest gain (+9.0 percent).  
Manufacturing productivity also increased in all the compared 
economies, except for Italy.  (See chart 1.)  In this news release, 
data for Australia are included for the first time.
       
    As in 2002, U.S. productivity growth in manufacturing in 2003 was 
substantially above its average annual growth rate since 1979.  Seven 
of the other 12 economies for which comparisons are available also 
had productivity growth in 2003 that exceeded their annual average 
over the 1979-2003 period. (Average annual growth rates for selected 
measures over various time periods are found in tables A and B.)

PRINTED COPY CONTAINS CHART AT THIS POINT
Chart 1. Percent change in manufacturing output per hour, 2003

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   Unit labor costs in manufacturing, expressed in national currency 
units, rose in 8 of the 13 economies for which 2003 data are 
available, with a 1.6 percent increase in the United States.  Of the 
five economies that recorded declines in unit labor costs, Japan and 
Taiwan experienced very small increases in hourly compensation, 
Sweden had a relatively large increase in productivity, with the 
remaining two having productivity increases that were slightly 
greater than the corresponding hourly compensation increases.

    The widespread, and mostly large, increases in unit labor costs in 
U.S. dollar terms are explained by the depreciation of the dollar, 
particularly with respect to the euro and other European currencies.  
The U.S. dollar depreciated against the currencies of all the 
economies compared, but the depreciation was very slight versus the 
Taiwan dollar.  Unit labor costs fell in U.S. dollar terms only in 
Taiwan. (See chart 2 and table A.)

PRINTED COPY CONTAINS CHART AT THIS POINT
Chart 2. Percent change in manufacturing unit labor costs, 2002-2003
 
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Table A.  Output per hour, hourly compensation, unit labor costs, and related measures
Manufacturing, 15 countries or areas, 2002-2003
Percent change

                     Output                                           Total    Hourly    Unit labor costs
Country               per               Total    Employ-   Average  compen-   compen-   National     U.S.  Exchange
or area              hour     Output    hours      ment     hours    sation    sation   currency   dollars   rate (1)


United States          6.8       1.7     - 4.8     - 4.7     - 0.1       3.3       8.5       1.6       1.6      ---

Canada                 1.2     - 0.5     - 1.7     - 0.8     - 0.9       1.9       3.6       2.4      14.7      12.1
Australia              3.3       1.2     - 2.0     - 1.9     - 0.1       NA        NA        NA        NA       19.9
Japan                  4.5       3.2     - 1.3     - 2.0       0.7     - 0.5       0.8     - 3.5       4.2       8.0
Korea                  9.0       4.8     - 3.9     - 3.7     - 0.2       5.1       9.3       0.3       5.2       4.9
Taiwan                 3.7       5.8       2.1       1.7       0.4       2.6       0.6     - 3.0     - 2.6       0.4

Belgium                3.2     - 0.6     - 3.7     - 3.0     - 0.7       NA        NA        NA        NA       19.7
Denmark                4.3       0.5     - 3.6     - 3.1     - 0.5       1.0       4.8       0.5      20.5      19.9
France                 1.9     - 0.5     - 2.3     - 2.2     - 0.1       0.5       2.9       1.0      20.9      19.7
Germany                2.6       0.2     - 2.4     - 2.7       0.3     - 0.2       2.3     - 0.3      19.3      19.7
Italy                - 1.0     - 1.4     - 0.4       0.2     - 0.6       2.8       3.2       4.2      24.8      19.7
Netherlands            NA      - 2.8       NA      - 3.0       NA        0.6       NA        3.5      23.8      19.7
Norway                 1.6     - 3.8     - 5.4     - 4.6     - 0.8     - 1.4       4.3       2.6      15.6      12.7
Sweden                 5.9       2.0     - 3.7     - 2.9     - 0.8     - 0.1       3.7     - 2.0      17.8      20.3
United Kingdom         5.5       0.4     - 4.8     - 4.5     - 0.4       0.2       5.3     - 0.2       8.5       8.8

(1)  Value of foreign currency relative to the U.S. dollar.

NA=Not Available 


Additional data available
    Annual indexes of these variables also are estimated for the time 
period 1950-2003 and are available at the Bureau of Labor Statistics, 
Division of Foreign Labor Statistics website at address 
http://www.bls.gov/fls/home.htm.  Because the value added output data 
for U.S. manufacturing industries are not available prior to 1977, 
the comparative measure of output, output per hour, and unit labor 
costs for the United States begin with 1977.  However, for analytical 
purposes, the international comparisons in this release go back to 
1979.

    For further information, contact the Office of Productivity and 
Technology by phone at 202-691-5654, by e-mail at flspr@bls.gov, or 
by mail at Bureau of Labor Statistics, 2 Massachusetts Avenue, NE, 
Room 2150, Washington, DC 20212. 

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BOX: Notes about the measures
     	
The measures in this release are based on data available to BLS as of 
August 2004.  Revisions for 2002 and earlier years were made for 
several countries to incorporate data not available at the time of 
the March 2004 report.

United States
U.S. data in this release have been revised from 1998 forward and are 
based for the first time on the 1997 North American Industry 
Classification System (NAICS).  Output, a value-added measure, is 
based on a new methodology that balances and reconciles industry 
production with commodity usage.  Data for 2003 are accelerated 
estimates from limited source data, prepared by the Bureau of 
Economic Analysis (BEA) using extrapolations from the National Income 
and Product Accounts (NIPAs).  Additional details are available in 
"Improved Annual Industry Accounts for 1998-2003," Survey of Current 
Business, June 2004.  The NAICS-based employment, hours, and 
compensation data back to 1998 are taken from the series published by 
BLS as part of the major sector productivity and costs measures for 
the United States.  (Canadian data are also on a NAICS basis for 1997 
onward.  See Technical Notes.)

Australia
With this press release, Australia becomes the fifteenth country for 
which manufacturing productivity and unit labor costs are compared.  
Australian economic data are published by fiscal year, which runs 
from July 1 through June 30.  The Australian Bureau of Statistics 
(ABS) was able to supply unpublished calendar-year data for real 
value added, employment, and hours worked for recent years.  For 
earlier years, and for compensation, the Bureau of Labor Statistics 
made estimates using two-year moving averages of the data for fiscal 
years.  The earliest year for which suitable fiscal-year data are 
available for real value added, employment, and hours is 1975.  
Manufacturing compensation data are not available for years prior to 
1990.  The data for the following series, for the years given, are 
estimates using two-year moving averages:  real value added, 1975; 
employment, 1975-1986; hours, 1975-1986; compensation, 1990-2002.

Denmark
Denmark published new employment and hours worked series for all 
employed persons from 1966 forward.  The data for compensation of 
employees also has been revised from 1966 forward.  The deflation 
method used for converting output in current prices to output in real 
terms has been changed from a fixed base-year to an annual chain-
linked Laspeyres method, consistent with the United Nations System of 
National Accounts (SNA 93) guidelines.

Korea
Korea made changes in its national accounts methods to bring them 
into closer accord with SNA 93 guidelines.  These changes, from 1995 
forward, have resulted in revisions downward in manufacturing value 
added and revisions upward in compensation.  The annual rates of 
change in both series were little affected by the revisions.

END OF BOX (Notes about the measures)

-5-

Manufacturing productivity, output, and labor input

    The growth in labor productivity (output per hour) in U.S. 
manufacturing remained high at 6.8 percent in 2003.  This growth was 
not as high as the record set in 2002 of 10.2 percent, an increase 
that has been revised upward by one percentage point over the figure 
in the March press release.  U.S. productivity growth in 2003 trailed 
only that of Korea, at 9.0 percent, and was followed closely by 
Sweden (+5.9 percent) and the United Kingdom (+5.5 percent).  All 
other economies recorded productivity increases except Italy, which 
experienced a decline in productivity of 1.0 percent, following a 
greater decrease in 2002.  For the second year, productivity growth 
continued to be low in Canada (+1.2 percent) and in Norway (+1.6 
percent).  The United Kingdom, Denmark, Japan, Australia, and Germany 
had higher productivity growth in 2003 than in 2002.

    The increases in labor productivity occurred despite a decline in 
manufacturing output in 6 of the 15 economies.  In 2003, 
manufacturing output grew most in the Asian economies.  The increase 
in U.S. manufacturing output (+1.7 percent) was exceeded by only one 
of the nine European countries, Sweden (+2.0 percent).  Five of the 
European countries experienced declines in manufacturing output in 
2003, and the others had only very small increases.  Output also 
declined in Canada.  (See table B.)

    Hours worked in manufacturing declined in 2003 in all the 
economies except Taiwan.  Norway  had the greatest decline in hours 
worked (-5.4 percent), followed by the United States and the United 
Kingdom, both with declines of 4.8 percent.  In 2002, the United 
States had the greatest decline among countries compared.  In eight 
of the countries with declines in hours worked, output increased in 
2003, resulting in substantial productivity increases in most cases.  
In four other countries, declines in manufacturing output were more 
than offset by greater falls in hours worked, also resulting in 
productivity increases.  Only in Italy was the output decline greater 
than the drop in hours worked, resulting in a fall in productivity. 
(See tables A and B.)

    The reductions in hours worked in manufacturing continued a 
general trend during the last decades in the manufacturing sectors of 
these economies.  Canada and Taiwan were exceptions, with aggregate 
hours worked in manufacturing increasing in both since 1979.  In most 
of the other economies, hours worked in manufacturing reached their 
maximum levels in the 1960s and 1970s (the United States in 1979) and 
have exhibited a downward trend since then.  Five of the eight 
European countries for which hours data are available had greater 
declines than the United States over the period 1979-2003.  In Taiwan 
and Korea, manufacturing hours have been declining since the late 
1980s.  In most economies, the rate of decline slowed somewhat in the 
second half of the 1990s when compared with the 1990-1995 period.  
(See table B.)

    For most economies, reductions in manufacturing hours over the 
last several decades were the result of declines in both 
manufacturing employment and average hours worked.  The reduction in 
average hours began earlier, but the decline in employment has been 
steeper and steadier.  In the United States, Australia, Italy, and 
Sweden, average hours have risen slightly since 1979.  (See table B.)

-6-

    In 2003, the U.S. decline in manufacturing employment was the 
largest among the economies compared for the third year in a row.  
Manufacturing employment also declined in all the other economies 
except Italy and Taiwan.  Taiwan, Japan, and Germany were the only 
economies that had increases in average hours worked in 2003. (See 
tables A and B.)

Manufacturing hourly compensation and unit labor costs

    The United States had the second highest increase in hourly 
compensation in manufacturing in 2003, expressed in national 
currencies.  All of the 12 economies for which statistics are 
available had increases, with Korea at 9.3 percent outpacing the 8.5 
percent U.S. rate.  Of the 11 countries with data for the 1979-2003 
period, the United States was the only one to have a greater increase 
in 2003 than its average annual growth rate for the entire period.  
Total compensation data are not available for Australia and Belgium 
for 2003.  The absence of hourly compensation data for the 
Netherlands for 2003 is a result of unavailable hours data. (See 
table B.)

    Unit labor costs, expressed in national currency units, exhibited 
a mixed pattern in 2003, with increases in 8 of the 13 countries for 
which data are available.  Of the seven economies with increases that 
have data going back to 1979, three had increases in 2003 that were 
above their 1979-2003 trend and four had increases that were below.  
Italy had the greatest increase in unit labor costs at 4.2 percent 
and Japan, with average gains in productivity and below average 
increases in hourly compensation, had the biggest fall in unit labor 
costs.  U.S. unit labor costs increased by 1.6 percent in 2003, as 
the increase in hourly compensation surpassed the growth in 
productivity.

    To compare changes in competitiveness across economies, the effect 
of exchange rate fluctuations must be taken into account by 
expressing unit labor costs in a common monetary unit.  When a 
foreign currency appreciates against the U.S. dollar, more dollars 
must be paid in exchange for each national currency unit.  This leads 
to a larger increase, or a smaller decline, in unit labor costs in 
U.S. dollar terms than the corresponding change in unit labor costs 
expressed in the national currency.  This makes products from that 
country more expensive and lessens its competitiveness.

    In 2003, the U.S. dollar depreciated against the currencies of all 
the economies compared, continuing a weakening trend after 2001.  In 
most cases, the depreciation was much greater, with the exception of 
Norway, than the depreciations that occurred in 2002: 19.7 percent 
against the euro, 20.3 percent against the Swedish krona, 19.9 
percent against the Australian dollar and the Danish krone, 12.7 
percent against the Norwegian krone, and 12.1 percent against the 
Canadian dollar.  Only versus the Taiwanese dollar, at 0.4 percent, 
was the depreciation of the U.S. dollar negligible.  (See table B.)

    The weakness in the U.S. dollar pushed up dollar-denominated unit 
labor costs for most U.S. competitors in 2003, even where unit labor 
costs in national currencies declined.  Unit labor costs of all other 
countries either increased more (seven countries), turned from 
decreases to increases (four countries), or decreased less (Taiwan) 
when expressed in U.S. dollars than in national currencies.  In 8 of 
the 13 economies, unit labor costs in U.S. dollars rose at double-

-7-

digit rates.  In France, Italy, Denmark, and the Netherlands, these 
increases surpassed 20 percent.  The European increases were all well 
above the average annual rates of increase since 1979, though they 
were still less than in the 1985-1987 period, when the dollar 
weakened even more.  (See tables A and B and chart 3.)

-8-

Table B.  Output per hour, hourly compensation, unit labor costs, and related measures
Manufacturing, 15 countries or areas, 1979-2003

Average annual rates of change 1/

Country           1979-2003 1979-1990 1990-1995 1995-2000 2000-2003 2001-2002 2002-2003
or area

Output per hour

United States        3.8       3.0       3.3       4.7       6.0      10.2       6.8

Canada               2.5       2.2       3.8       2.8       0.7       2.8       1.2
Australia            3.1       2.7       2.9       3.9       3.2       2.9       3.3
Japan                3.6       3.8       3.3       4.1       2.4       3.0       4.5
Korea                NA        NA        9.7      10.8       5.9       9.8       9.0
Taiwan               5.9       6.4       5.3       5.6       5.5       6.3       3.7

Belgium              3.7       4.2       3.2       2.9       3.8       6.8       3.2
Denmark              2.4       2.1       2.7       2.4       2.6       3.2       4.3
France               4.2       4.2       4.0       4.5       3.5       4.8       1.9
Germany 2/           2.4       2.1       3.3       2.5       1.9       2.5       2.6
Italy                1.6       2.2       2.2       1.0      -0.8      -1.7      -1.0
Netherlands          NA        3.5       3.5       2.5       NA        2.2       NA
Norway               1.5       2.0       0.5       1.1       2.1       1.7       1.6
Sweden               4.3       2.5       5.7       7.1       3.8       9.0       5.9
United Kingdom       3.8       4.5       3.6       2.6       3.7       2.1       5.5

    Output

United States        2.6       2.3       3.1       4.5      -0.5       2.4       1.7

Canada               2.6       1.9       2.4       5.9      -0.4       2.9      -0.5
Australia            1.7       1.6       0.9       2.6       1.7       3.9       1.2
Japan                2.5       4.7       0.4       2.0      -0.8      -2.0       3.2
Korea                8.6      10.1       8.4       7.9       4.8       7.6       4.8
Taiwan               6.0       7.6       5.0       5.7       2.0       6.3       5.8

Belgium              1.9       2.6       0.6       2.9       0.3       1.0      -0.6
Denmark              1.2       1.0       2.0       1.6      -0.1      -0.6       0.5
France               2.0       2.0       1.1       3.5       1.1       0.9      -0.5
Germany 2/           0.6       1.2      -0.7       1.0      -0.1      -0.2       0.2
Italy                1.3       2.0       1.5       1.2      -1.0      -1.2      -1.4
Netherlands          1.9       2.5       1.8       2.6      -1.4      -0.8      -2.8
Norway               0.0      -0.4       1.1       1.0      -1.7      -0.7      -3.8
Sweden               3.2       1.8       3.7       7.4       1.1       4.1       2.0
United Kingdom       0.6       0.9       0.5       1.3      -1.4      -3.1       0.4

                                                          Continued on next page

-9-

Table B.  Output per hour, hourly compensation, unit labor costs, and related measures
Manufacturing, 15 countries or areas, 1979-2003

Average annual rates of change 1/

Country           1979-2003 1979-1990 1990-1995 1995-2000 2000-2003 2001-2002 2002-2003
or area

 Total hours

United States       -1.2      -0.7      -0.1      -0.2      -6.2      -7.1      -4.8

Canada               0.1      -0.2      -1.3       3.0      -1.1       0.1      -1.7
Australia           -1.4      -1.1      -2.0      -1.2      -1.5       1.0      -2.0
Japan               -1.0       0.8      -2.8      -2.0      -3.1      -4.8      -1.3
Korea                NA        NA       -1.2      -2.6      -1.0      -2.0      -3.9
Taiwan               0.1       1.2      -0.3       0.1      -3.3      -0.1       2.1

Belgium             -1.7      -1.6      -2.5      -0.1      -3.4      -5.5      -3.7
Denmark             -1.1      -1.1      -0.6      -0.8      -2.7      -3.7      -3.6
France              -2.1      -2.1      -2.8      -1.0      -2.3      -3.8      -2.3
Germany 2/          -1.8      - .9      -3.9      -1.5      -2.0      -2.7      -2.4
Italy               -0.3      -0.2      -0.7       0.1      -0.3       0.5      -0.4
Netherlands          NA       -1.0      -1.7       0.0       NA       -2.9       NA
Norway              -1.4      -2.3       0.6      -0.1      -3.7      -2.4      -5.4
Sweden              -1.0      -0.7      -1.9       0.3      -2.7      -4.5      -3.7
United Kingdom      -3.1      -3.4      -3.0      -1.3      -4.8      -5.1      -4.8

  Employment

United States       -1.2      -0.8      -0.6      -0.1      -5.5      -7.3      -4.7

Canada               0.1      -0.2      -1.5       2.8      -0.4       0.3      -0.8
Australia           -1.5      -1.3      -2.3      -1.1      -1.4       1.0      -1.9
Japan               -0.7       1.0      -1.6      -1.9      -3.1      -4.7      -2.0
Korea                NA        NA       -0.9      -2.5       0.0      -1.2      -3.7
Taiwan               0.7       2.0      -0.3       0.4      -1.6      -1.8       1.7

Belgium             -1.5      -1.6      -2.2      -0.7      -2.0      -3.6      -3.0
Denmark             -1.0      -0.5      -1.2      -0.9      -2.6      -3.3      -3.1
France              -1.4      -1.6      -2.5      -0.3      -0.9      -1.7      -2.2
Germany 2/          -1.3      -0.1      -4.2      -0.8      -1.5      -2.2      -2.7
Italy               -0.7      -0.9      -1.6       0.1       0.3       0.8       0.2
Netherlands         -0.9      -0.8      -1.6       0.2      -2.1      -2.9      -3.0
Norway              -1.3      -2.2       0.3       0.1      -2.9      -1.2      -4.6
Sweden              -1.4      -1.0      -3.5       0.0      -1.6      -2.8      -2.9
United Kingdom      -2.7      -2.9      -2.6      -1.4      -4.5      -4.4      -4.5

                                                          Continued on next page

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Table B.  Output per hour, hourly compensation, unit labor costs, and related measures
Manufacturing, 15 countries or areas, 1979-2003

Average annual rates of change /1

Country           1979-2003 1979-1990 1990-1995 1995-2000 2000-2003 2001-2002 2002-2003
or area

Average hours

United States        0.1       0.2       0.4      -0.1      -0.7       0.2      -0.1

Canada               0.0       0.0       0.3       0.1      -0.7      -0.2      -0.9
Australia            0.1       0.2       0.3      -0.1       0.0       0.0      -0.1
Japan               -0.4      -0.2      -1.3      -0.1       0.0       0.0       0.7
Korea                NA        NA       -0.2      -0.1      -1.1      -0.7      -0.2
Taiwan              -0.6      -0.8       0.0      -0.3      -1.8       1.7       0.4

Belgium             -0.1       0.0      -0.3       0.6      -1.5      -2.0      -0.7
Denmark             -0.2      -0.6       0.6       0.1      -0.1      -0.4      -0.5
France              -0.6      -0.5      -0.3      -0.7      -1.4      -2.1      -0.1
Germany 2/          -0.5      -0.9       0.3      -0.6      -0.4      -0.5       0.3
Italy                0.4       0.6       0.9       0.0      -0.6      -0.3      -0.6
Netherlands          NA       -0.2       0.0      -0.2       NA        0.0       NA
Norway              -0.2      -0.1       0.3      -0.2      -0.9      -1.2      -0.8
Sweden               0.4       0.3       1.7       0.2      -1.1      -1.7      -0.8
United Kingdom      -0.4      -0.6      -0.4       0.1      -0.3      -0.7      -0.4

Total labor compensation in manufacturing 3/:  National currency basis

United States        3.7       5.0       3.4       4.1      -0.7      -0.9       3.3

Canada               4.9       6.6       2.4       5.5       2.0       2.6       1.9
Australia            NA        NA        3.5       3.1       NA        4.5       NA
Japan                2.4       5.5       0.7      -1.1      -0.4       2.0      -0.5
Korea                NA        NA       16.8       5.4       6.4       7.9       5.1
Taiwan               7.9      13.5       6.8       4.2      -3.3      -2.8       2.6

Belgium              NA        4.4       1.3       2.0       NA        1.5       NA
Denmark              4.4       6.8       2.3       3.0       2.0       0.9       1.0
France               3.6       6.5       1.1       1.1       1.8       1.5       0.5
Germany 2/           3.0       4.6       2.3       1.6       0.7      -0.3      -0.2
Italy                7.0      11.4       4.2       2.9       2.8       3.0       2.8
Netherlands          3.0       3.1       2.8       3.4       2.7       3.5       0.6
Norway               5.0       6.5       4.0       5.0       1.5       3.4      -1.4
Sweden               5.5       8.4       2.0       5.3       1.3      -1.1      -0.1
United Kingdom       4.5       7.1       2.4       3.4       0.1       0.1       0.2

                                                          Continued on next page

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Table B.  Output per hour, hourly compensation, unit labor costs, and related measures
Manufacturing, 15 countries or areas, 1979-2003

Average annual rates of change 1/

Country           1979-2003 1979-1990 1990-1995 1995-2000 2000-2003 2001-2002 2002-2003
or area

Hourly compensation:  National currency basis

United States        4.9       5.6       3.5       4.3       5.8       6.7       8.5

Canada               4.8       6.8       3.7       2.4       3.2       2.5       3.6
Australia            NA        NA        5.6       4.3       NA        3.5       NA
Japan                3.4       4.6       3.6       1.0       2.9       7.1       0.8
Korea                NA        NA       18.2       8.1       7.5      10.1       9.3
Taiwan               7.8      12.1       7.1       4.0       0.0      -2.8       0.6

Belgium              NA        6.1       3.9       2.0       NA        7.3       NA
Denmark              5.6       7.9       2.9       3.8       4.8       4.9       4.8
France               5.8       8.8       4.0       2.2       4.2       5.4       2.9
Germany 2/           4.9       5.6       6.4       3.2       2.7       2.5       2.3
Italy                7.3      11.7       4.9       2.8       3.1       2.4       3.2
Netherlands          NA        4.1       4.5       3.3       NA        6.5       NA
Norway               6.6       9.0       3.4       5.2       5.4       6.0       4.3
Sweden               6.6       9.1       4.0       5.1       4.1       3.5       3.7
United Kingdom       7.8      10.9       5.6       4.8       5.2       5.5       5.3

Unit labor costs 3/:  National currency basis

United States        1.1       2.6       0.2      -0.4      -0.2      -3.2       1.6

Canada               2.3       4.6      -0.1      -0.4       2.4      -0.3       2.4
Australia            NA        NA        2.6       0.4       NA        0.5       NA
Japan               -0.2       0.8       0.3      -3.0       0.4       4.0      -3.5
Korea                NA        NA        7.8      -2.4       1.5       0.3       0.3
Taiwan               1.8       5.4       1.7      -1.5      -5.2      -8.6      -3.0

Belgium              NA        1.8       0.7      -0.9       NA        0.5       NA
Denmark              3.2       5.7       0.2       1.4       2.2       1.6       0.5
France               1.6       4.4      -0.1      -2.2       0.7       0.6       1.0
Germany 2/           2.4       3.3       3.1       0.6       0.8       0.0      -0.3
Italy                5.6       9.3       2.6       1.8       3.9       4.2       4.2
Netherlands          1.2       0.6       1.0       0.8       4.2       4.3       3.5
Norway               5.0       6.9       2.9       4.0       3.2       4.2       2.6
Sweden               2.2       6.5      -1.6      -1.9       0.3      -5.0      -2.0
United Kingdom       3.8       6.2       2.0       2.1       1.5       3.3      -0.2

                                                          Continued on next page

-12-

Table B.  Output per hour, hourly compensation, unit labor costs, and related measures
Manufacturing, 15 countries or areas, 1979-2003

Average annual rates of change 1/

Country           1979-2003 1979-1990 1990-1995 1995-2000 2000-2003 2001-2002 2002-2003
or area

Unit labor costs 3/:  U.S. dollar basis

United States        1.1       2.6       0.2      -0.4      -0.2      -3.2       1.6

Canada               1.5       4.6      -3.3      -2.0       4.5      -1.6      14.7
Australia            NA        NA        1.5      -4.3       NA        5.8       NA
Japan                2.5       4.6       9.4      -5.7      -2.0       1.0       4.2
Korea                NA        NA        6.0      -9.5      -0.3       3.7       5.2
Taiwan               2.0       8.2       2.0      -4.7      -8.2     -10.4      -2.6

Belgium              NA        0.6       3.3      -8.4       NA        6.1       NA
Denmark              2.2       4.1       2.3      -5.8       9.5       7.3      20.5
France               0.3       2.1       1.7      -8.9       7.8       6.2      20.9
Germany2             2.7       4.5       5.6      -6.9       7.9       5.6      19.3
Italy                2.5       5.7      -3.5      -3.2      11.2      10.0      24.8
Netherlands          1.3       1.5       3.6      -6.9      11.5      10.1      23.8
Norway               3.5       4.9       2.6      -2.7      11.0      17.4      15.6
Sweden              -0.5       3.4      -5.2      -6.7       4.6       1.0      17.8
United Kingdom       2.7       4.5      -0.5       1.3       4.1       7.8       8.5

Exchange rates 4/

United States       ---       ---       ---       ---       ---       ---       ---

Canada              -0.7       0.0      -3.2      -1.6       2.0      -1.4      12.1
Australia           -2.2      -3.2      -1.1      -4.7       3.9       5.2      19.9
Japan                2.7       3.8       9.1      -2.7      -2.4      -2.9       8.0
Korea               -3.7      -3.4      -1.7      -7.3      -1.7       3.3       4.9
Taiwan               0.2       2.7       0.3      -3.3      -3.1      -2.1       0.4

Belgium             -0.8      -1.2       2.5      -7.6       7.0       5.6      19.7
Denmark             -0.9      -1.5       2.0      -7.1       7.2       5.7      19.9
France              -1.3      -2.2       1.8      -6.8       7.0       5.6      19.7
Germany2             0.2       1.1       2.5      -7.5       7.0       5.6      19.7
Italy               -3.0      -3.3      -6.0      -4.9       7.0       5.6      19.7
Netherlands          0.1       0.9       2.6      -7.6       7.0       5.6      19.7
Norway              -1.4      -1.9      -0.3      -6.4       7.6      12.7      12.7
Sweden              -2.6      -2.9      -3.7      -4.9       4.3       6.4      20.3
United Kingdom      -1.1      -1.6      -2.4      -0.8       2.5       4.4       8.8

                                                NA = not available

1/ Rates of change based on the compound        3/ Adjusted for employment taxes and
   rate method.                                    government subsidies to estimate the
                                                   actual cost to employers.
2/ Data for years before 1991 pertain to the
   former West Germany.                         4/ Value of foreign currency relative to
                                                   the U.S. dollar.

-13-

Trade-weighted unit labor costs

    BLS constructs indexes of U.S. unit labor cost trends relative to a 
trade-weighted average of unit labor cost trends in the other economies 
to take account of differences in the relative importance of foreign 
economies to U.S. trade in manufactured goods.  Relative trade-weighted 
unit labor cost indexes are calculated on both a national currency and a 
U.S. dollar basis.  In this release, the relative U.S. trade-weighted 
indexes are estimated against 11 economies for which comparable data are 
available over this period; the indexes underlying this chart are shown 
in table C.
    Chart 3 begins in 1979, a year in which U.S. manufacturing output 
reached a business cycle peak.

PRINTED COPY CONTAINS CHART AT THIS POINT:
Chart 3. U.S. manufacturing unit labor costs relative to 11 competitors, 
1979-2002
 
    
    In the chart, the solid line indicates that U.S. unit labor costs 
rose faster than "competitors" costs from 1979 to 1986 on a U.S. dollar 
basis.  In most years from 1986 to 1995, U.S. costs either rose at a 
slower rate than the "competitors" costs or fell at a faster rate.  From 
1996 to 1998, however, the strength of the U.S. dollar caused relative 
U.S. unit labor costs to rise.  After a dip in 1999, the index of 
relative U.S. unit labor costs rose in 2000 and 2001, only to dip again 
after 2001 with a weakening of the U.S. dollar. 

-14-

Table C. U.S. manufacturing unit labor
costs relative to 11(1) competitors, 1979-2003

        Unit Labor Costs             Unit Labor Costs
        National Currency Basis      U.S. Dollar Basis
  Year    Own   Competitors'           Own   Competitors'
         Index      Index     Ratio   Index      Index     Ratio

  1979   100.0      100.0     100.0   100.0      100.0     100.0
  1980   111.4      110.5     100.8   111.4      110.2     101.1
  1981   116.5      118.7      98.2   116.5      109.5     106.4
  1982   124.2      126.7      98.1   124.2      106.1     117.1
  1983   121.6      128.9      94.3   121.6      105.1     115.6
  1984   121.0      130.0      93.1   121.0      100.2     120.8
  1985   123.4      130.6      94.5   123.4       97.7     126.3
  1986   128.9      136.2      94.6   128.9      123.8     104.1
  1987   122.8      138.6      88.6   122.8      142.9      85.9
  1988   122.5      138.6      88.4   122.5      154.0      79.6
  1989   128.0      141.7      90.3   128.0      152.2      84.1
  1990   132.4      147.4      89.8   132.4      164.1      80.7
  1991   138.0      153.1      90.2   138.0      173.6      79.5
  1992   141.3      156.5      90.3   141.3      181.5      77.9
  1993   142.3      157.0      90.6   142.3      177.9      80.0
  1994   139.2      154.4      90.1   139.2      177.8      78.3
  1995   134.0      153.8      87.1   134.0      187.0      71.7
  1996   132.1      155.0      85.2   132.1      178.8      73.9
  1997   129.9      153.1      84.9   129.9      164.3      79.1
  1998   131.2      154.8      84.7   131.2      157.2      83.4
  1999   129.8      152.0      85.4   129.8      159.4      81.5
  2000   131.2      146.8      89.4   131.2      150.0      87.5
  2001   132.7      150.3      88.3   132.7      143.4      92.5
  2002   128.4      152.1      84.4   128.4      145.9      88.0
  2003   130.4      151.4      86.2   130.4      162.3      80.4
  
(1) Data for Australia, Belgium, and Korea are not available for 1979 and/or for 2003.
     These three countries have been omitted from this table.
-15-

Technical Notes

   The comparisons in this release make use of data made available to 
BLS as of August 2004 by the statistical agencies of the individual 
countries.

 Labor productivity is defined as real output per hour worked. 
Although the labor productivity measure presented in this release 
relates output to the hours worked of persons employed in 
manufacturing, it does not measure the specific contributions of 
labor as a single factor of production. Rather, it reflects the joint 
effects of many influences, including new technology, capital 
investment, capacity utilization, energy use, and managerial skills, 
as well as the skills and efforts of the workforce.

 Unit labor costs are defined as the cost of labor input required to 
produce one unit of output. They are computed as compensation in 
nominal terms divided by real output.

 The Bureau of Labor Statistics constructs trends of manufacturing 
labor productivity, hourly compensation costs, and unit labor costs 
from three basic aggregate measures -- output, total labor hours, and 
total compensation. The hours and compensation measures refer to 
employees (wage and salary earners) in Belgium and Taiwan.  For all 
other economies, the measures refer to all employed persons, 
including employees, self-employed persons, and unpaid family 
workers. For all of the economies, the term "hours" refers to hours 
worked.

 In general, the measures relate to total manufacturing as defined by 
the International Standard Industrial Classification (ISIC). However, 
the measures for Denmark include mining and exclude manufacturing 
handicrafts from 1950 to 1966, and the measures for France include 
parts of mining. From 1998 forward, data for the United States are in 
accordance with the North American Industrial Classification System 
(NAICS 97).  Prior to that, they are in accordance with the Standard 
Industrial Classifications (SIC 87, 1987-1997; SIC 72, 1950-1986).  
From 1997 forward, data for Canada are in accordance with the NAICS 
97 and, prior to 1997, with the Canadian SIC 80.

 For most countries, the data for the most recent years are based on 
the United Nations System of National Accounts 1993 (SNA 93) or its 
sub-system, the European System of Integrated National Accounts (ESA 
95). For other countries, data were compiled according to previously 
used systems.

 To obtain historical time series, BLS may link together data series 
which were compiled according to different accounting systems by the 
countries' statistical agencies.

 Output. For most countries, the output measures are real value added 
in manufacturing from national accounts. However, output for Japan 
prior to 1970 and for the Netherlands prior to 1960 are indexes of 
industrial production. The manufacturing value added measures for the 
United Kingdom are essentially identical to their indexes of 
industrial production.

 The output measure for manufacturing in the United States is the 
chain-weighted index of real gross product originating (deflated 
value added), introduced by the Bureau of Economic Analysis (BEA) of 
the U.S. Department of Commerce in August 1996. Because these value 
added output data for U.S. manufacturing industries are not available 
for years prior to 1977, the comparative U.S. measures of output, 
output per hour, and unit labor costs begin with 1977. For more 

-16-

information on the U.S. measure, see "Improved Estimates of Gross 
Product by Industry for 1947-98," Survey of Current Business, June 
2000, pp. 24-38.

 The U.S. output series used for international comparisons differs 
from the manufacturing output series that BLS publishes as part of 
its major sector productivity and costs measures for the United 
States. While both series are based on annually-changing price 
weights, the international comparisons program uses a value added 
output concept, while the major sector series is on a sectoral output 
basis and begins with 1949. Sectoral output is gross output less 
intrasector sales and transfers. The U.S. major sector productivity 
and costs measures can be found at http://www.bls.gov/lpc/home.htm. 
For information on sectoral output, see "Measurement of productivity 
growth in U.S. manufacturing," Monthly Labor Review, July 1995, pp. 
13-28.

 Value added measures have been used for the international comparisons 
series because the data are more readily available from the 
countries' national accounts, whereas sectoral output would require a 
complex estimation procedure. Also, although BLS has determined that 
sectoral output is the correct concept for U.S. measures of 
productivity, there are other considerations that may make value 
added a better concept for international comparisons of labor 
productivity, such as differences among countries in the extent of 
vertical integration of industries.

 Estimation of manufacturing real output using moving price weights, 
as recommended by SNA 93, is becoming prevalent. However, many 
earlier time periods within the historical real output series have 
been estimated using fixed price weights, with the weights updated 
periodically (for example, every 5 or 10 years).

 Measures of real output also may differ among countries because of 
different approaches to estimating the prices of high-technology 
products like computers and, in general, of products that undergo 
rapid quality change.

 Labor Input. For the United States, the hours worked data are taken 
from the BLS major sector productivity program. The aggregate hours 
worked series used for France (from 1970 forward), Australia, Canada, 
Denmark, Norway, and Sweden are series published with the national 
accounts. For the former West Germany after 1959 and Germany from 
1991, BLS uses aggregate hours worked, which were developed by a 
research institute of the German Ministry of Labor for use with the 
national accounts employment figures. For the United Kingdom from 
1992, an annual index of total manufacturing hours is used. For all 
other countries, the U.K. before 1992, and the former West Germany 
before 1959, BLS constructs its own estimates of aggregate hours, 
using employment figures published with the national accounts, or 
other comprehensive employment series, and estimates of average 
annual hours worked. The Italian hours worked series is based on 
estimates by the Bank of Italy. In this news release, the all 
employed actual hours worked data for Denmark, beginning with 1966, 
are new series released by that country's statistical office.

 Compensation (Labor Cost).  The compensation measures are from 
national accounts data. Compensation includes employer expenditures 
for legally required insurance programs and contractual and private 
benefit plans, in addition to all payments made in cash or in kind 
directly to employees. When data for the self-employed are not 
available, total compensation is estimated by assuming the same 

-17-

average compensation for the self-employed as for employees. Real 
compensation for the United States is derived using the Consumer 
Price Index research series (CPI-U-RS).

 Labor cost is defined as compensation plus employment taxes minus 
employment subsidies, i.e. the cost to employers of hiring labor. For 
most countries, labor cost is the same as compensation. However, for 
Australia, Canada, France, and Sweden, compensation is increased to 
account for important taxes on payroll or employment. For the United 
Kingdom, compensation is reduced between 1967 and 1991 to account for 
subsidies.

 Data for Germany. German data pertain to unified Germany from 1991 
forward and to the former West Germany for prior years. The data 
series are linked in 1991. In the index tables, separate indexes are 
shown for unified Germany and for former West Germany. West German 
estimates end with 1998 and have not been revised by BLS since the 
news release USDL 99-235, on Aug. 27, 1999.

 Current Indicators. The measures for recent years may be based on 
current indicators of output (such as industrial production indexes), 
employment, average hours, and hourly compensation until national 
accounts and other statistics, normally used for the long-term 
measures, become available.

 Trade-Weighted Measures. The trade weights for Canada, Japan, and the 
European countries were obtained by re-scaling a series of weights, 
developed by the International Monetary Fund, based on average trade 
flows over the 1989-91 period. These weights are based on aggregate 
trade data for total manufacturing and take account of both bilateral 
trade and the relative importance of "third country" markets. The 
1989-91 weights do not include Taiwan. BLS developed weights for 
Taiwan by using data from an earlier study from the International 
Monetary Fund and other sources. The weight used for Germany is based 
on the trade weight of the former West Germany.

 The following weights were used for the entire period for which 
trade-weighted unit labor cost measures are produced:

   Country   Weight    Country        Weight

   Canada    25.87     Italy           4.70
   Japan     31.23     Netherlands     2.30
   Taiwan     5.92     Norway          0.49
   Denmark    0.49     Sweden          1.93
   France     6.03     United Kingdom  9.18
   Germany   11.86

 Level Comparisons. The BLS measures are limited to trend comparisons. 
BLS does not prepare level comparisons of manufacturing productivity 
and unit labor costs because of data limitations and technical 
problems in comparing the levels of manufacturing output among 
countries. Each country measures manufacturing output in its own 
currency units. To compare outputs among countries, a common unit of 
measure is needed. Market exchange rates are not suitable as a basis 
for comparing output levels. What is needed are purchasing power 
parities, which are the number of foreign currency units required to

-18-

buy goods and services equivalent to what can be bought with one unit 
of U.S. currency.

 Purchasing power parities are available for total gross domestic 
product (GDP) from the Organization for Economic Cooperation and 
Development (OECD). However, these parities are derived for 
expenditures made by consumers, business, and government for goods 
and services -- not for value added by industry. Therefore, they do 
not provide purchasing power parities by industry. The parities 
developed for total GDP are not suitable for each component industry, 
such as manufacturing.

 European exchange rates. On Jan. 1, 1999, 11 European countries 
joined the European Monetary Union (EMU). Greece joined on Jan. 1, 
2001. The euro, the official currency of the EMU, was established at 
fixed conversion rates to the previous national currencies of EMU 
members. Data on manufacturing value added and labor compensation for 
euro-area countries are now reported in euros. And exchange rates 
between the previous national currencies of euro-area countries and 
the U.S. dollar are no longer reported; only the exchange rate 
between the euro and the U.S. dollar is available.

 In order to maintain historical continuity of data series, data for 
euro-area countries for years before 1999 have been converted to 
euros by applying the fixed euro/national currency conversion rates. 
For countries and years where output, compensation, and exchange 
rates are converted from national currency units into euros, the 
following fixed conversion rates are used:

1 euro equals: 40.3399 Belgian francs    1936.27 Italian lire
               6.55957 French francs     2.20371 Netherlands guilders
               1.95583 German marks

 The currency exchange rates cited in this publication are annual 
averages of daily buying rates in New York City.