Internet address: http://www.bls.gov           USDL 05-308
Technical information: (202) 691-5654          For Release: 10:00 A.M. EST
Media contact: (202) 691-5902                  Friday, February 25, 2005

INTERNATIONAL COMPARISONS OF MANUFACTURING PRODUCTIVITY AND UNIT 
LABOR COST TRENDS, REVISED DATA FOR 2003

     Revised data for 2003 show that the increase in U.S. 
manufacturing productivity (+9.7 percent) was the second highest 
among 14 economies compared, according to the U.S. Department of 
Labor's Bureau of Labor Statistics.  This was below the increase 
recorded in Japan (+11 percent) and ahead of Korea (+9 percent).  The 
United Kingdom and Sweden also showed productivity gains of over 5 
percent, while productivity remained constant in Canada and declined 
in Italy.  (See chart 1.)
       
     The U.S. productivity growth in 2003, an upward revision from 
the preliminary estimate of 6.8 percent released in September 2004, 
continues the rapid growth of U.S. manufacturing productivity after 
2000, at 6.9 percent per year on average.  This was the fastest 
growth rate in those years among the 14 economies for which 
comparable data are available.  Only in two other economies did 
productivity growth surpass 5 percent per year after 2000.  (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, 2002-2003

-2-

     Unit labor costs in manufacturing, expressed in national 
currency units, fell in 7 of the 15 economies compared.  The decline 
in unit labor costs in U.S. manufacturing (-1.1 percent) is a 
revision from the preliminary estimate (+1.6 percent) released in 
September 2004, and corresponds to the revised increase in 
productivity.  Unit labor costs declined most in Japan (-9.2 
percent), reflecting that country's strong productivity growth.

     In 2003, the dollar decreased in value against the currencies of 
all the other 14 economies compared, especially against the euro and 
other European currencies.  This resulted in substantially higher 
unit labor costs in U.S. dollar terms for most of these economies.  
Unit labor costs in U.S. dollars declined only where the U.S. 
dollar's depreciation was slight (Taiwan) or where the reduction in 
unit labor costs in national currency units was very large (Japan). 
(See chart 2 and table A.)

PRINTED COPY CONTAINS CHART AT THIS POINT: Chart 2. Percent change in 
manufacturing unit labor costs, 2002-2003

-3-

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              9.7       4.5     - 4.8     - 4.7     - 0.1       3.3       8.5     - 1.1     - 1.1      ---

Canada                     0.0       0.1       0.1       0.5     - 0.4       1.5       1.3       1.4      13.6      12.1
Australia                  3.8       1.7     - 2.0     - 1.9     - 0.1       3.2       5.3       1.4      21.6      19.9
Japan                     11.0       9.6     - 1.3     - 2.0       0.7     - 0.5       0.8     - 9.2     - 1.9       8.0
Korea                      9.0       4.8     - 3.9     - 3.7     - 0.2       5.1       9.3       0.3       5.2       4.9
Taiwan                     3.6       5.7       2.1       1.7       0.4       3.7       1.6     - 1.9     - 1.5       0.4

Belgium                    4.7       0.8     - 3.7     - 3.3     - 0.4       0.3       4.1     - 0.5      19.1      19.7
Denmark                    3.6     - 0.2     - 3.6     - 3.1     - 0.5       1.0       4.8       1.2      21.3      19.9
France                     1.9     - 0.5     - 2.3     - 2.2     - 0.1       0.5       2.9       1.0      20.9      19.7
Germany                    2.7       0.2     - 2.4     - 2.7       0.3     - 0.7       1.7     - 0.9      18.6      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                     6.5       2.6     - 3.6     - 2.8     - 0.9     - 0.1       3.7     - 2.6      17.1      20.3
United Kingdom             5.6       0.4     - 5.0     - 4.5     - 0.5       0.2       5.4     - 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. 

-4-

Box: Notes about measures

                        Notes about the measures
     
The measures in this release are based on data available to BLS as of 
mid-January 2005.  Revisions for 2003 and earlier years were made for 
several economies to incorporate data not available at the time of 
the September 2004 report.

United States
U.S. output data in this release have been revised beginning with 
1987.  The data, a value-added measure, are produced by the BEA as 
part of the integrated annual GDP-by-industry and input-output (I-O) 
accounts.  From 1987 they are now based on the 1997 North American 
Industry Classification System (NAICS).  Output for 2003 in the 
September 2004 report was a preliminary estimate by the BEA, using an 
abbreviated methodology and limited source data.  The output measure 
in this release is based on revised data published by the BEA in 
December 2004, incorporating the most timely and highest quality 
source data available, including data from the 2004 annual revision 
of the national income and product accounts (NIPAs), combined within 
an I-O framework.  They also incorporate the 2003 comprehensive 
revisions of the NIPAs.  Additional details are available in Robert 
E. Yuskavage and Yvon Pho, "Gross Domestic Product by Industry for 
1987-2000," Survey of Current Business, November, 2004, and in the 
news release BEA News, December 20, 2004.

The NAICS-based employment, hours, and compensation data back to 1987 
are taken from the series published by BLS as part of the major 
sector productivity and cost measures for the United States.

Australia
Australian data are published by fiscal years, which run from July 1 
through June 30.   The Australian Bureau of Statistics provided 
unpublished calendar year data for real value added, employment, and 
hours worked.  For compensation, the Bureau of Labor Statistics 
estimated calendar-year series using two-year moving averages of the 
data for fiscal years.  Manufacturing compensation data are not 
available for years prior to 1990.

Japan
In the September 2004 report, a preliminary estimate was made of the 
2003 increase in Japanese real manufacturing output, using the 
relative change in the industrial production index.  In the present 
release, the change in output is based on the growth in real value 
added in manufacturing.  The revision results in a large increase in 
Japan's productivity growth for 2003.

Netherlands
Data for hours worked in manufacturing have not been released for 
2003 by the Netherlands Central Bureau of Statistics.  In this 
report, 2003 estimates of labor productivity and hourly compensation 
are not available for the Netherlands.

End of Box: Notes about measures

-5-

Manufacturing productivity, output, and labor input

     The revised 2003 increase in U.S. manufacturing productivity 
(output per hour) of 9.7 percent was half a percentage point below 
the corresponding 2002 increase, but well above the average annual 
gains of the period since 1979.  (See table B.)  The average 
productivity growth of 6.9 percent per year during 2000-2003 was 
greater than for any 3-year period since 1979.  Only Japan's 
productivity gain of 11 percent was above the U.S. increase in 2003.  
Of the 14 economies for which comparable data are available, average 
annual productivity growth over the 2000-2003 period was highest in 
the United States.  Other economies with relatively high average 
annual productivity gains over 2000-2003 were Korea, Taiwan, Sweden, 
and Japan.  Productivity declined in Italy during these years, while 
Canada, Germany, and Norway recorded small increases.  Productivity 
data for 2003 are not estimated for the Netherlands because hours 
data are not available.  (See tables A and B.)

     Changes in manufacturing labor productivity correspond to 
changes in output and in total hours worked.  Of the 12 economies 
that experienced growth in labor productivity in 2003, 9 also had 
increases in manufacturing output.  Output increased most in Japan 
(+9.6 percent).  Other economies where manufacturing output went up 
over 4 percent in 2003 were Taiwan, Korea, and the United States.  
Among European countries, only Sweden recorded output growth above 1 
percent, while five countries recorded declines.  Both productivity 
and output went down in Italy.  (See table A.)

     Total manufacturing hours worked in 2003 declined in 12 of the 
14 economies for which hours data are available, rising only in 
Taiwan (+2.1 percent) and Canada (+0.1 percent).  The 4.8 percent 
fall in 2003 U.S. manufacturing hours was the third largest decline 
among the economies compared, after Norway (-5.4 percent) and the 
United Kingdom (-5 percent).  Italy, Japan, and Australia experienced 
declines in hours of 2 percent or less.  (See table A.)

     The reductions in manufacturing hours reflect a trend in most 
industrial economies, as hours worked fell over the 1979-2003 period 
in 11 of the 13 economies for which hours data are available.  Also, 
in all of these 11 countries, the 2003 fall was greater than the 
1979-2003 average annual decline.  (See table B.)  For the United 
States, the drop in hours during 2000-2003 was greater than for any 
3-year period since 1950.

     Productivity increased in 11 of the 12 countries with hours 
declines.  This occurred even in France, Denmark, and Norway, where 
output fell, because hours declined more.  (See table A.)

     Total hours worked are a function of both the number of people 
employed and the average hours worked per person.  In 2003, 
manufacturing employment fell in 12 of the 15 economies.  Employment 
declined most in the United States (-4.7 percent), followed closely 
by Norway and the United Kingdom.  The United States also had the 
largest percent decline in employment in 2002, as well as over the 
entire 2000-2003 period.  In 2003, employment decreased least in 
Australia, and it grew in Taiwan, Canada, and Italy.  (See tables A 
and B.)

-6-

     In 2003, average hours worked per person fell in 11 of the 14 
economies for which hours data are available, while going up in only 
Japan, Taiwan, and Germany.  Average hours fell most in Sweden (-0.9 
percent) and Norway (-0.8).  In the United States average hours 
worked went down by 0.1 percent.

     Although both factors, employment and average hours, contributed 
to the declines in total manufacturing hours in 2003, the impact of 
the reductions in employment was greater: of the 12 countries where 
total hours went down, the employment declines were relatively larger 
than the declines in average hours in all except Italy, where 
employment rose while average hours declined.  (See table A.)

Manufacturing hourly compensation and unit labor costs

     In 2003, the United States recorded the second largest increase 
in manufacturing hourly compensation, expressed in national currency 
units, among the 14 economies for which comparable data are 
available.  The U.S. 8.5 percent increase trailed only Korea's 9.3 
percent growth.  Hourly compensation grew in all the 14 economies, 
with the smallest increases occurring in Japan, Canada, and Taiwan.  
The U.S. 2003 increase in hourly compensation was above its average 
annual growth rates for 1979-2003.  Since 1983, U.S. hourly 
compensation grew more only in 2000.  Hourly compensation data for 
2003 are not estimated for the Netherlands because hours data are not 
available.  (See table B.)

     Relative changes in unit labor costs, expressed in national 
currency units, are directly proportional to relative changes in 
hourly compensation, and inversely proportional to relative changes 
in labor productivity.  In 2003, both hourly compensation and labor 
productivity increased in most of the economies compared, so that 
changes in unit labor costs were determined by the relative 
magnitudes of these increases.  Unit labor costs, in national 
currency units, fell in 7 of the 15 economies compared.  The drop was 
greatest in Japan (-9.2 percent), reflecting that country's large 
increase in manufacturing productivity.  In the United States unit 
labor costs declined by 1.1 percent despite the large increase in 
hourly compensation, because productivity increased even more.  This 
drop in U.S. unit labor costs followed a 3.2 percent decline in 2002, 
and was approximately equal to the average annual reductions over the 
2000-2003 period.  In 2003, unit labor costs increased most in Italy 
(+4.2 percent), a combination of a 3.2 percent increase in hourly 
compensation and a 1 percent decline in productivity.  (See tables A 
and B.)

     Often exchange rate movements are the dominant influence on the 
relative changes in the unit labor costs of different economies.  In 
2003, the U.S. dollar depreciated against the currencies of all the 
economies compared, especially against the euro and other European 
currencies.  This depreciation was at double-digit rates against the 
currencies of Canada, Australia, and all European countries except 
the United Kingdom.  (See table A.)

The depreciation of the U.S. dollar pushed up U.S. dollar-denominated 
unit labor costs in most of the other economies being compared.  
These increases were also at double-digit rates in all the European 
countries except the United Kingdom, as well as in Canada and 

-7-

Australia.  Besides the United States, U.S. dollar-denominated unit 
labor costs declined only in Japan and Taiwan.  In Japan the 
reduction was the result of a 9.2 percent drop in yen-denominated 
unit labor costs that was only partly offset by the 8 percent 
appreciation of the yen against the U.S. dollar.  The Taiwan dollar 
appreciated only slightly against the U.S. dollar (+0.4 percent) in 
2003, not enough to counter a 1.9 percent decline in local currency-
denominated unit labor costs.  For both 2002 and 2003 the dollar's 
depreciation increased unit labor costs, denominated in U.S. dollars, 
in most of the other economies compared.  This effect was especially 
strong in 2003.  (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        4.2       3.0       3.7       5.7       6.9      10.2       9.7

Canada               2.5       2.0       3.8       3.2       0.8       4.2       0.0
Australia            3.1       2.8       2.9       3.9       3.5       3.4       3.8
Japan                3.8       3.8       3.3       4.1       4.3       2.3      11.0
Korea                NA        NA        9.6      10.8       5.9       9.8       9.0
Taiwan               5.8       6.2       5.2       5.5       5.6       7.5       3.6

Belgium              3.6       4.2       3.2       2.9       3.3       4.2       4.7
Denmark              2.3       2.1       2.7       2.4       2.4       3.2       3.6
France               4.2       4.2       4.0       4.5       3.5       4.8       1.9
Germany 2/           2.4       2.1       3.3       2.7       1.7       2.1       2.7
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               4.4       2.5       5.7       7.1       4.7      10.4       6.5
United Kingdom       3.6       4.1       3.3       2.6       3.7       2.1       5.6

    Output

United States        3.0       2.4       3.6       5.4       0.3       2.3       4.5

Canada               2.5       1.8       2.4       5.9      -0.6       2.4       0.1
Australia            1.7       1.6       0.9       2.6       2.0       4.4       1.7
Japan                2.8       4.7       0.4       2.0       1.0      -2.6       9.6
Korea                8.6      10.1       8.4       7.9       4.8       7.6       4.8
Taiwan               5.9       7.5       4.9       5.6       2.1       7.4       5.7

Belgium              1.9       2.6       0.6       2.9       0.3       0.1       0.8
Denmark              1.2       1.0       2.0       1.6      -0.4      -0.6      -0.2
France               2.0       2.0       1.1       3.5       1.1       0.9      -0.5
Germany 2/           0.6       1.2      -0.7       1.2      -0.3      -0.7       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               3.4       1.8       3.7       7.4       2.0       5.7       2.6
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       -1.1      -0.6      -0.1      -0.2      -6.2      -7.1      -4.8

Canada               0.0      -0.2      -1.3       2.6      -1.4      -1.7       0.1
Australia           -1.4      -1.2      -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       -1.1      -2.6      -1.0      -2.0      -3.9
Taiwan               0.1       1.2      -0.3       0.1      -3.3      -0.1       2.1

Belgium             -1.6      -1.6      -2.5      -0.1      -2.9      -4.0      -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      -0.9      -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      -2.6      -4.2      -3.6
United Kingdom      -2.9      -3.1      -2.8      -1.3      -4.9      -5.1      -5.0

  Employment

United States       -1.2      -0.8      -0.5      -0.1      -5.5      -7.3      -4.7

Canada               0.0      -0.2      -1.5       2.4      -0.7      -1.3       0.5
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       -0.8      -2.5       0.0      -1.2      -3.7
Taiwan               0.7       2.0      -0.3       0.4      -1.6      -1.8       1.7

Belgium             -1.6      -1.6      -2.2      -0.7      -2.2      -4.0      -3.3
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      -1.5      -2.7      -2.8
United Kingdom      -2.7      -2.9      -2.6      -1.4      -4.5      -4.4      -4.5

                                                          Continued on next page

-10-

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      -0.2      -0.7       0.2      -0.1

Canada               0.0       0.0       0.3       0.2      -0.6      -0.4      -0.4
Australia            0.1       0.1       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              0.0       0.0      -0.3       0.6      -0.7       0.0      -0.4
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      -0.5      -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      -1.6      -0.9
United Kingdom      -0.2      -0.2      -0.2       0.1      -0.4      -0.7      -0.5

Total labor compensation in manufacturing 3/:  National currency basis

United States        3.8       4.9       3.4       4.4      -0.7      -0.9       3.3

Canada               4.7       6.5       2.4       5.2       1.3       1.6       1.5
Australia            NA        NA        3.5       3.1       3.5       4.3       3.2
Japan                2.4       5.5       0.7      -1.1      -0.4       2.0      -0.5
Korea                NA        NA       17.6       5.4       6.4       7.9       5.1
Taiwan               7.9      13.5       6.8       3.6      -2.2      -4.3       3.7

Belgium              2.9       4.4       1.3       2.0       1.4      -0.5       0.3
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/           2.9       4.6       2.3       1.6       0.3      -0.6      -0.7
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               5.6       8.4       2.0       5.3       2.1       1.0      -0.1
United Kingdom       4.5       7.1       2.4       3.4       0.1       0.1       0.2

                                                          Continued on next page
                                                          
-11-

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        5.0       5.5       3.5       4.7       5.8       6.7       8.5

Canada               4.7       6.8       3.8       2.5       2.7       3.3       1.3
Australia            NA        NA        5.6       4.3       5.0       3.3       5.3
Japan                3.4       4.6       3.6       1.0       2.9       7.1       0.8
Korea                NA        NA       18.9       8.1       7.5      10.1       9.3
Taiwan               7.8      12.1       7.1       3.4       1.2      -4.2       1.6

Belgium              4.6       6.1       3.9       2.0       4.4       3.6       4.1
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/           4.8       5.6       6.4       3.1       2.3       2.2       1.7
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               6.7       9.1       4.0       5.1       4.8       5.5       3.7
United Kingdom       7.6      10.6       5.4       4.8       5.3       5.5       5.4

Unit labor costs 3/:  National currency basis

United States        0.7       2.5      -0.2      -0.9      -1.0      -3.2      -1.1

Canada               2.2       4.7       0.0      -0.6       2.0      -0.8       1.4
Australia            NA        NA        2.6       0.4       1.5      -0.1       1.4
Japan               -0.4       0.8       0.3      -3.0      -1.4       4.7      -9.2
Korea                NA        NA        8.5      -2.4       1.5       0.3       0.3
Taiwan               1.9       5.5       1.9      -1.9      -4.2     -10.9      -1.9

Belgium              0.9       1.8       0.7      -0.9       1.1      -0.6      -0.5
Denmark              3.2       5.7       0.2       1.4       2.4       1.6       1.2
France               1.6       4.4      -0.1      -2.2       0.7       0.6       1.0
Germany 2/           2.3       3.3       3.1       0.4       0.6       0.1      -0.9
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       0.0      -4.5      -2.6
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        0.7       2.5      -0.2      -0.9      -1.0      -3.2      -1.1

Canada               1.5       4.7      -3.2      -2.2       4.0      -2.2      13.6
Australia            NA        NA        1.5      -4.3       5.4       5.1      21.6
Japan                2.3       4.6       9.4      -5.7      -3.8       1.6      -1.9
Korea                NA        NA        6.7      -9.5      -0.3       3.7       5.2
Taiwan               2.1       8.4       2.2      -5.1      -7.2     -12.7      -1.5

Belgium              0.1       0.6       3.3      -8.4       8.2       5.0      19.1
Denmark              2.2       4.1       2.3      -5.8       9.7       7.3      21.3
France               0.3       2.1       1.7      -8.9       7.8       6.2      20.9
Germany 2/           2.6       4.5       5.6      -7.2       7.7       5.7      18.6
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       4.4       1.6      17.1
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
Germany 2/           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 12 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. US manufacturing 
unit labor costs relative to 12 competitors, 1979-2003
    
    
    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 12 competitors(1), 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      110.3     101.0   111.4      110.0     101.2
  1981   116.5      119.0      97.9   116.5      109.4     106.5
  1982   124.2      126.7      98.0   124.2      105.5     117.7
  1983   121.6      128.8      94.4   121.6      104.3     116.6
  1984   121.0      130.0      93.1   121.0       99.3     121.9
  1985   123.4      130.7      94.4   123.4       96.9     127.3
  1986   128.9      136.2      94.7   128.9      122.9     104.8
  1987   122.8      138.6      88.6   122.8      142.0      86.5
  1988   123.9      138.5      89.4   123.9      152.8      81.1
  1989   126.7      141.5      89.6   126.7      150.8      84.1
  1990   130.6      147.3      88.7   130.6      163.1      80.1
  1991   134.0      152.9      87.6   134.0      172.4      77.7
  1992   135.0      156.3      86.4   135.0      180.4      74.8
  1993   134.0      156.9      85.4   134.0      176.7      75.8
  1994   131.4      154.3      85.1   131.4      176.7      74.4
  1995   129.1      153.8      84.0   129.1      186.1      69.4
  1996   126.4      154.9      81.6   126.4      177.9      71.0
  1997   124.5      152.5      81.6   124.5      162.7      76.5
  1998   123.1      154.0      79.9   123.1      155.6      79.1
  1999   121.8      151.3      80.6   121.8      157.6      77.3
  2000   123.1      145.9      84.4   123.1      147.7      83.4
  2001   124.7      149.8      83.3   124.7      141.8      88.0
  2002   120.8      151.4      79.7   120.8      144.3      83.7
  2003   119.4      147.6      80.9   119.4      157.4      75.9
(1) Data for Australia and Korea are not available for 1979.
     These two 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 mid-January 2005 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 France include parts of mining. From 1987 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).  Canadian output and compensation data from 
1961, and employment and hours data from 1997, are in accordance with 
the NAICS 97. For prior years they are based on 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 and for earlier years, 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 

-16-

unit labor costs begin with 1977. For more 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 and "Gross 
Domestic Product by Industry for 1987-2000," Survey of Current Business, 
November 2004, pp. 33-53.

    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), 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 a measure of 
aggregate hours worked that was 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. 

    Compensation (Labor Cost).  The compensation measures are from 
national accounts data and are in nominal terms. 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

-17-

are not available, total compensation is estimated by assuming the same 
average compensation for the self-employed as for employees.

    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 prior to 1991 pertain to the former 
West Germany. The data series are linked in 1991.

    Data for Australia. Australian data are published by fiscal years, 
which run from July 1 through June 30. The Australian Bureau of 
Statistics provides unpublished calendar-year data for real value added, 
employment, and hours worked. For compensation, the Bureau of Labor 
Statistics estimates calendar-year series using two-year moving averages 
of the data for fiscal years. Manufacturing compensation data are not 
available for years prior to 1990.

    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     25.31      Germany        11.61
Japan      30.57      Italy           4.60
Taiwan      5.79      Netherlands     2.25
Belgium     2.14      Norway          0.48
Denmark     0.48      Sweden          1.89
France      5.90      United Kingdom  8.99
    
    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 

-18-

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 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.