Internet address:http://www.bls.gov/mfp	 USDL 08-0617
Historical, technical		         For Release: 10:00 AM EDT
information:	(202) 691-5606	         Tuesday, May 6, 2008
Media contact:	(202) 691-5902	
		


PRELIMINARY MULTIFACTOR PRODUCTIVITY TRENDS, 2007

Private Business Sector and Private Nonfarm Business Sector

Multifactor productivity, defined as output per combined units of labor and 
capital inputs, grew at an annual rate of 0.7 percent in the private 
business sector and 0.6 percent in the private nonfarm business sector 
for 2007, the Bureau of Labor Statistics (BLS) and the U.S. Department 
of Labor reported today.
                            			2006-07
Private business sector	                          0.7
Private nonfarm business sector	                  0.6

The estimates of multifactor productivity in the private business and in 
the private nonfarm business sectors for 2007 both show a slight increase
from 2006.  The 2006-07 annual changes are summarized in tables A and B. 
Table B also presents data showing historical trends. 

Multifactor productivity is designed to measure the joint influences of 
economic growth on technological change, efficiency improvements, returns
to scale, reallocation of resources, and other factors, allowing for the 
effects of capital and labor.  Multifactor productivity, therefore, differs
from the labor productivity (output per hour worked) measures that are 
published quarterly by BLS since it includes information on capital services
and other data that are not available on a quarterly basis.   Additionally,
multifactor productivity measures for the private business and private 
nonfarm business sectors account for shifts in the composition of labor. 
Estimates of labor composition are not included in the quarterly labor 
productivity measures.

In private business and private nonfarm business, the change in multifactor 
productivity reflects the difference between the change in real gross domestic
product for the sector and the change in labor and capital inputs engaged in 
the production of this output.  The output measures for private business and 
private nonfarm business are similar to the indexes of output for business 
and nonfarm business used in the quarterly labor productivity measures 
differing only in that the output of government enterprises is omitted.

A change in multifactor productivity reflects the change in output that
cannot be accounted for by the change in combined inputs of labor and capital. 
In contrast, a change in labor productivity reflects the change in output
that cannot be accounted for by the change in hours of all persons engaged
in production.

Table A.  Productivity and related data, percent changes 2006-07

	                                 Private Business1   Private Nonfarm   
                                                                Business1                   
Productivity		
    Multifactor Productivity2	                 0.7	         0.6
    Output per hour of all persons	         1.8	         1.8
    Output per unit of capital services	        -0.8            -0.9
		 
Output	                                         2.3	         2.3
		 
Inputs		
    Labor input3	                         0.9	         1.0
        Hours	                                 0.4	         0.5
        Labor Composition4	                 0.5	         0.5
    Capital services	                         3.2	         3.2
    Combined units of labor and capital inputs5  1.6	         1.7
		
Analytic ratio
		
    Capital services per hour of all persons	 2.7	         2.7
               
1 Excludes government enterprises.
2 Output per unit of combined labor and capital inputs.
3 Index of hours at work by education and experience group, weighted by each 
  group’s share of labor compensation.
4 Ratio of labor input to hours.
5 Labor input index combined with capital services input index, weighted by 
labor’s and capital’s shares of nominal output.

Private business sector

Chart 1 shows the annual indexes of multifactor productivity, output per hour 
worked, and output per unit of capital services during the 1987-2007 period 
for the private business sector.  Over the last 20 years, capital services 
have grown more rapidly than hours in the private business sector, and the 
skills of workers -- as measured by their education and work experience -- 
also have risen over this period.  These shifts toward more capital intensive
production and toward workers with more human capital have supplemented labor
productivity growth, usually allowing output per hour to grow at a faster rate
than multifactor productivity.

Multifactor productivity rose 0.7 percent for the private business sector in 
2007 (see table A).   The multifactor productivity gain in 2007 reflected a
2.3 percent increase in output and a 1.6 percent increase in the combined 
inputs of capital and labor.

Capital services grew 3.2 percent.  Labor input posted an increase of 0.9 
percent, as both hours worked and labor composition rose.  The capital-labor 
ratio (capital services per hour of all persons) increased by 2.7 percent.

Labor input reflects the change in hours at work adjusted for the effects 
of changing labor composition.  The increase of labor input was due to an 
increase in hours at work of 0.4 percent and an increase of 0.5 percent 
in labor composition.  Labor productivity (output per hour worked) increased
1.8 percent.  Capital productivity (output per unit of capital services) fell
0.8 percent.  As shown in table B, the contribution of labor composition rose
0.3 percent from 2006 to 2007, while the contribution of capital intensity 
growth gained 0.9 percent over the same period. 

Private nonfarm business sector

Multifactor productivity rose 0.6 percent for the private nonfarm business 
sector in 2007 (see table A).   The multifactor productivity gain in 2007 
reflected a 2.3 percent increase in output and a 1.7 percent increase in the 
combined inputs of capital and labor.

Capital services grew 3.2 percent.  Labor input posted an increase of 1.0 
percent, as both hours worked and labor composition rose.  The capital-labor
ratio (capital services per hour of all persons) increased by 2.7 percent.

The increase of labor input was due to an increase of 0.5 percent in hours at
work and an increase of 0.5 percent in labor composition.  Labor productivity 
(output per hour worked) increased 1.8 percent.  Capital productivity 
(output per unit of capital services) fell 0.9 percent.  The contribution of 
labor composition rose 0.3 percent, while the contribution of capital 
intensity growth gained 0.9 percentage points from the previous period 
(see table B). 


Table B.  Compound average annual rates of growth in output per hour of all
persons and the contributions of capital intensity, labor composition, and
multifactor productivity, by major sector, 1987 to 2007
            
(percent per year) 

	              1987-07 1987-90 1990-95 1995-00 2000-07 2006-07
Private business1						
						
Output per hour 
of all persons	        2.2	1.6	1.5	2.7	2.7	1.8
						
Contribution of 
capital intensity2	0.8	0.6	0.6	1.1	0.9	0.9
						
Contribution of
labor composition3	0.4	0.4	0.4	0.3	0.4	0.3
						
Multifactor 
productivity4	        1.0	0.6	0.5	1.3	1.4	0.7

Private nonfarm 
business1						
						
Output per hour
of all persons	        2.2	1.5	1.6	2.5	2.6	1.8
						
Contribution of
capital intensity2	0.8	0.6	0.6	1.1	0.9	0.9
						
Contribution 
of labor composition3	0.4	0.4	0.4	0.3	0.4	0.3
						
Multifactor
productivity4	        1.0	0.5	0.5	1.1	1.3	0.6

1.Excludes government enterprises.
2.Growth rate in capital services per hour multiplied by capital's share 
of current dollar costs.
3.Growth rate of labor composition (the growth rate of labor input less 
the growth rate of the hours of all persons) multiplied by labor's share 
of current dollar costs.
4.Output per unit of combined labor and capital inputs.

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

Comprehensive tables containing additional data not included in this news 
release are available at http://www.bls.gov/mfp/mprdload.htm or in print 
upon request.