Economic News Release

For release 10:00 a.m. (EDT) Wednesday, September 26, 2012	                                USDL-12-1938

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MULTIFACTOR PRODUCTIVITY TRENDS FOR DETAILED INDUSTRIES, 2010

Multifactor productivity - defined as output per unit of combined inputs - increased in 73 of the 86 
four-digit NAICS manufacturing industries in 2010, the U.S. Bureau of Labor Statistics reported today. 
(See table 1.) This was up from 2009, when multifactor productivity increased in only 17 of those 
industries. More industries recorded multifactor productivity gains in 2010 than in any year since 2004.

Seventeen manufacturing industries recorded double-digit percent increases in multifactor productivity. 
Industries where multifactor productivity rose the most in 2010 were semiconductors and electronic 
components; motor vehicles; leather and hide tanning and finishing; forging and stamping; and cutlery 
and hand tools.

Multifactor productivity rose in both of the transportation industries studied in 2010.  Multifactor 
productivity increased 3.8 percent in air transportation and 7.3 percent in line-haul railroads. 

Multifactor productivity indexes relate the change in real output to the change in the combined inputs of 
labor, capital, and intermediate purchases consumed in producing that output. Multifactor productivity 
growth measures the extent to which output growth has exceeded the growth in inputs, and reflects the 
joint influences on economic growth of a variety of factors, including technological change, returns to 
scale, enhancements in managerial and staff skills, changes in the organization of production, and other 
efficiency improvements.

Output increased in 65 manufacturing industries in 2010, compared to only 7 in 2009.  Double-digit 
percent increases in output occurred in 27 industries, and multifactor productivity rose in all of those 
industries except alumina and aluminum production. For some manufacturing industries, multifactor 
productivity rose despite falling output, as combined inputs fell more rapidly.  These industries include 
printing and related support activities; architectural and structural metals; and railroad rolling stock. 

Combined inputs of capital, labor, and intermediate purchases rose in 43 manufacturing industries in 
2010, compared to 12 industries in 2009. Purchases of intermediate inputs rose in 56 percent of the 
industries, labor hours rose in 47 percent, and capital services rose in 16 percent.

Among the largest manufacturing industries (those with employment over 200,000), multifactor productivity 
increased the most in semiconductors and electronic components, as output surged despite a much smaller 
increase in inputs. Pharmaceuticals and medicines was the only industry where multifactor productivity 
declined among these industries, reflecting a large drop in output with no corresponding decline in inputs.

Multifactor productivity in air transportation increased more in 2010 than in any of the previous 4 years, 
and in line haul railroads it increased more in 2010 than in any other year since 1987. Air 
transportation output increased 4.4 percent and combined inputs grew 0.6 percent. Line-haul railroads 
output rose 12.8 percent and combined inputs increased 5.2 percent.

Year-to-year movements in industry multifactor productivity measures may be erratic, particularly in 
smaller industries. The annual measure based on sample data may differ from measures generated by a 
census of establishments in the industry. Annual changes in an industry's output, labor, capital, and 
intermediate purchases may reflect cyclical changes in the economy as well as long-term trends. As a 
result, long-term multifactor productivity changes tend to be more reliable indicators of industry 
performance than year-to-year changes.

Historical Trends

Between 1987 and 2010, multifactor productivity increased in 46 of 86 manufacturing industries, fewer 
than in 2010. (See table 2.) Output increased in 43 industries over the period while purchases of 
combined inputs rose in 44 industries.  Average rates of change in multifactor productivity for most 
manufacturing industries ranged between -1.9 and 2.0 percent over the long term. In contrast, more 
industries recorded large productivity increases in 2010 than over the long-term; 33 industries posted 
multifactor productivity gains of 6.1 percent or more in 2010, the most since the measures began in 1987.

Table 3 presents the average annual compound rate of change in multifactor productivity by industry 
from 1987 to 2010 and for various subperiods. Multifactor productivity increased in more industries in 
2010 than over any of the previous subperiods shown; the number in 2010 contrasts sharply with the 
number during the 2007-2009 period.
 
From 1987 to 2010 multifactor productivity rose for both transportation industries, although at a more 
moderate rate than in 2010. Multifactor productivity in air transportation grew at an average annual rate 
of 1.1 percent during this period, as output increased more than combined inputs. In line-haul railroads, 
multifactor productivity increased at an average of 2.1 percent per year as output rose and combined 
inputs declined slightly.