International comparisons of manufacturing productivity and unit labor cost trends

Source: U.S. Labor Department's Bureau of Labor Statistics

Jan 19, 2011

Manufacturing labor productivity decreased in 2009 in 12 of the 19 economies compared by the Bureau of Labor Statistics. The United States had the largest productivity increase, 7.7%, and Japan had the steepest productivity decline, -11.4%. For the first time, both output and hours in manufacturing declined in all 19 economies compared. In most economies, output declined by more than 10% and hours by more than 8%.

The trends in manufacturing for 2009 stand in contrast to the trends seen over the last 30 years. Between 1979 and 2009, labor productivity and output increased in all economies compared in this report. In addition, the average annual declines in hours in most economies over the last 30 years were smaller than the declines in hours from 2008 to 2009.

Unit labor costs are the cost of labor input required to produce one unit of output and can be expressed either in national currency units or in U.S. dollars. Expressed in national currency units, manufacturing unit labor costs increased in all but 4 economies compared in 2009, with the largest increases in Germany and Finland. However, due to the strength of the U.S. dollar, which appreciated against all currencies except the Japanese yen, unit labor costs converted to U.S. dollars decreased in 12 of the foreign economies.

In 2009, U.S. manufacturing labor cost competitiveness declined relative to 10 economies because unit labor costs on a U.S. dollar basis decreased more in those economies than in the United States. U.S. labor cost competitiveness improved relative to the other 8 foreign economies. In Japan, a large increase in national currency unit labor costs and a strong yen combined to push unit  labor costs up more than 20% on a U.S. dollar basis.