21) Economic Indicators: Productivity Report

by · October 16, 2010

What It Is

The Productivity Report is prepared by the Bureau of Labor Statistics and is released every three months (quarterly) or around five weeks after the end of the last quarter. There are revisions at approximately eight weeks after the end of the third month.

As its name suggests, it measures the output level against a labor unit. To get the figures for the report, there should be input and output. The input refers to the amount of time employees spend on producing something as well as the total employee costs, which include the fringe benefits, stock options, salary, and taxes paid by the employer. On the other hand, the output depends on the previous GDP or gross domestic product.

Basic Information

Productivity is defined as a unit of measure of an output unit per input unit. Productivity may refer to every industry to determine the growth of wages and labor, as well as the effects of technology to increase output, or it may refer to the entire economy, as in the case of growth of GDP. Productivity Report falls into both.

It is not like most of the reports, though. It is neither a lagging, leading, nor coincident indicator as it depends most of its data from other reports and indicators such as Consumer Price Index. Nevertheless, it is very important to read productivity report.

If the annual percentage changes in the report are higher than the previous, then it means there is increased productivity. This could mean a positive economic growth, as companies can catch up with the demand without really increasing their labor force and thus their labor costs. It can also reduce inflation, as it’s a common practice to pass on additional business costs to consumers. Of course, increased productivity boosts company profits.

This is also good for the employees as a company can now increase their salary without passing on the burden to their customers. As a whole, a positive productivity value means growth of the GDP.

In the report there will be a summary of percentage changes to get a good look of the economy in terms of productivity. However, there will also be a breakdown according to the business group, which includes all non-farm and manufacturing industries. Unlike the rest of the data in the report, manufacturing percentages are derived on the volume of output, not on the country’s GDP.

How the Report Is Valuable

By studying the productivity report, you will get to know more about inflation pressures and discover the best ways to boost GDP without causing the rise of inflation rates. It also provides an overview of the possible GDP, as GDP is comprised of 75 percent productivity. There are only two things that are not included in calculating productivity: nonprofit groups and government results. Businesses and investors can use the report to determine their level of productivity.

The report can also get very comprehensive upon its release, which can be both a boon and a bane. It’s good because you can look at the economy as a whole and as one composed of several business groups. The report may also present information without or with inflation effects. However, because of its comprehensiveness, it takes time to come up with the report.

The country can use the information to determine their standing with the rest of the world’s economies.

Things to Watch Out For

It’s not a timely report. Besides the fact that there is such a long lag time, it is also highly dependent on other reports. Furthermore, although it’s very detailed, there’s still a danger of misinterpretation. Readers should learn to view the productivity rates in terms of its short-term and long-term effects. The revisions can also carry significant changes, but then they are not seen until after a few weeks after the report’s official release.

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