American factories produced far more per hour worked in the second quarter than the government initially reported. The Bureau of Labor Statistics said Thursday that manufacturing labor productivity rose at a 2.4 percent annualized rate from April through June, up from the preliminary estimate of 1.9 percent. First-quarter manufacturing productivity was also revised higher, to 2.2 percent from 1.9 percent.
The upgrade came from stronger factory output than previously counted, plus a smaller-than-expected increase in hours worked. Manufacturing output is now estimated to have jumped at a 5.4 percent annual rate, up from the earlier 4.6 percent figure. Hours worked rose 2.9 percent, revised up from 2.6 percent. That output surge is the largest since the second quarter of 2021, when output rose 6.7 percent.
The biggest revisions landed in durable-goods manufacturing — machinery, computers and electronics, fabricated metals, transportation equipment, and other long-lasting products. Productivity in that sector rose at a 3.6 percent annualized rate, up sharply from the preliminary 2.7 percent estimate. Durable-goods output was revised up to 8.9 percent from 7.3 percent, and hours worked were revised up to 5.1 percent from 4.5 percent. First-quarter durable-goods productivity was also raised, to 4.9 percent from 4.6 percent.
What makes this notable is that it happened while manufacturers were hiring, not shedding workers. Manufacturing employment grew in both the first and second quarters, with most of that growth in durable-goods industries. According to BLS data, outside of post-recession rebounds, durable-goods manufacturers have not posted productivity growth of at least 3.6 percent in back-to-back quarters while also adding jobs in both quarters since the late 1990s. This is that rare combination.
Nondurable manufacturing saw smaller adjustments — second-quarter productivity growth was revised up only one-tenth of a point, to 2.1 percent, while first-quarter productivity was revised to a 0.6 percent decline from a previously reported 0.7 percent decline.
Labor Costs Head the Other Way
The stronger productivity numbers translated directly into lower labor-cost pressure. Unit labor costs across the manufacturing sector fell at a 0.3 percent annualized rate in the second quarter — the preliminary estimate had shown no change at all. BLS says it’s the first quarterly decline in manufacturing unit labor costs since the second quarter of 2021.
In durable goods specifically, unit labor costs fell at a 2.2 percent annualized rate, a steeper drop than the earlier estimate of 1.6 percent. Hourly compensation in that sector rose 1.4 percent, but productivity gains of 3.6 percent outpaced it. First-quarter manufacturing unit labor costs were revised lower too, to a 3.3 percent increase from 3.5 percent, with the durable-goods figure revised to 2.6 percent from 2.9 percent.
The broader economy didn’t see the same upgrade. Nonfarm business productivity across the entire economy was left unchanged at a 1.4 percent annualized rate for the second quarter, with output up 1.7 percent and hours worked up 0.3 percent. First-quarter nonfarm productivity stayed at 0.8 percent. This was a manufacturing story, and specifically a durable-goods story.
BLS said the revised figures incorporate more recent data from the Labor Department, the Bureau of Economic Analysis, and the Federal Reserve that wasn’t available when the preliminary second-quarter numbers came out in August.
