BLS Says Multifactor Productivity Change Smallest Since 2009

Private nonfarm business sector multifactor productivity increased at a 0.3 percent annual rate in 2013, the Bureau of Labor Statistics reported Thursday. The slight increase in multifactor productivity was the smallest annual change since a 0.3-percent decline in 2009.

Multifactor productivity measures the change in output per unit of combined capital and labor input, or put simply, the productivity of the American worker with the tools he or she has at their disposal. It is designed to measure the joint influences of technological change, efficiency improvements, returns to scale, reallocation of resources and various other factors on economic growth. Unlike other similar measurements, it allows for the effects of capital and labor.

The multifactor productivity increase in 2013 was largely due to a 2.3 percent uptick in output and a 1.9 percent gain in the combined inputs of capital and labor. Further, Capital services grew by 1.9 percent, while labor input — which measures the number of hours worked and the labor composition combined — grew by 1.9 percent.

Capital services per hour of all persons slightly increased at a rate of 0.3 percent in 2013, up from the loss of 0.8 percent in 2012 and another loss of 1.1 percent in 2011.

Trends in multifactor productivity are not something to be optimistic about. Individual productivity, or the output per hour of all persons, for private businesses has averaged roughly 1.3 units since President Obama took office, compared to the nearly 2.7 units during the Reagan administration and the 2.35 during the Clinton administration. Private non-farm businesses saw just 1.3 averaged over the same 2009 – 2013 period.