Nonfarm business sector labor productivity decreased 7.3% in the first quarter of 2022, the U.S. Bureau of Labor Statistics reported, as output decreased 2.3% and hours worked increased 5.4%. This is the largest decline in quarterly productivity since the third quarter of 1947, when the measure decreased 11.7%. (All quarterly percent changes in this release are seasonally adjusted annual rates.) From the same quarter a year ago, nonfarm business sector labor productivity decreased 0.6%, reflecting a 4.2% increase in output that was outpaced by a 4.8% increase in hours worked. This is the largest four-quarter decline since the fourth quarter of 1993, when the measure also declined 0.6%.
Unit labor costs in the nonfarm business sector increased 12.6% in the first quarter of 2022, reflecting a 4.4% increase in hourly compensation and a 7.3% decrease in productivity. Unit labor costs increased 8.2% over the last four quarters.
This is the largest four-quarter increase in this measure since another 8.2% increase in the third quarter of 1982. BLS calculates unit labor costs as the ratio of hourly compensation to labor productivity. Increases in hourly compensation tend to increase unit labor costs and increases in productivity tend to reduce them.
Labor productivity, or output per hour, is calculated by dividing an index of real output by an index of hours worked by all persons, including employees, proprietors, and unpaid family workers. With the 5.4% increase to hours worked in the first quarter of 2022, this marks the first quarter that both the output and hours worked measures have surpassed their levels in the fourth quarter of 2019, the last quarter not affected by the COVID-19 pandemic. The first-quarter 2022 output index is 3.5% above the level seen in the fourth quarter of 2019, and the hours worked index is now 0.8% above its fourth quarter 2019 level. The labor productivity index is 2.6% higher in first-quarter 2022 than in fourth-quarter 2019, corresponding to an annual labor productivity growth rate of 1.2% during that period.
Manufacturing sector labor productivity increased 0.2% in the first quarter of 2022, as output increased 5.1% and hours worked increased 4.9%. In the durable manufacturing sector, productivity increased 0.9%, with a 6.9-percent increase in output and a 6.0% increase in hours worked. Nondurable manufacturing sector productivity saw no change, as both output and hours worked increased 3.2%. Total manufacturing sector productivity increased 1.5% from the same quarter a year ago.
Manufacturing sector output is now 3.1% above its level in the fourth quarter of 2019, the last quarter not affected by the COVID-19 pandemic. Hours worked in manufacturing remain 1.0% below the fourth-quarter 2019 level. The manufacturing labor productivity index is 4.2% higher in first-quarter 2022 than in fourth-quarter 2019, corresponding to an annual labor productivity growth rate of 1.8% during that period.
Unit labor costs in the total manufacturing sector increased 5.7% in the first quarter of 2022, reflecting a 5.9% increase in hourly compensation and a 0.2-percent increase in productivity. Manufacturing unit labor costs increased 4.8% from the same quarter a year ago.
Preliminary first-quarter 2022 measures were announced for the nonfinancial corporate sector. Productivity decreased 5.0% in the first quarter of 2022 as output increased 0.7% and hours worked increased 6.0%. Productivity decreased 0.2% over the last four quarters. Though unit profits of nonfinancial corporations decreased at a 5.1% annual rate in the first quarter of 2022, the measure increased 9.9% over the last four quarters.
