Manufacturing unit labor costs, expressed in national currency units,declined in nine of the economies and increased in seven. The change for the United States was near the middle of the range, at +0.1 percent.
However, expressed in U.S. dollars, unit labor costs declined in six of the economies and increased in 10. Declines in the dollar's exchange rate reversed the direction of movement in three countries. The reversal was largest for Korea, from a decline in unit labor costs in national currency of 3.6 percent to an increase in unit labor costs expressed in U.S. dollars of 3.5 percent. This difference can be explained by the strong appreciation of the won relative to the U.S.dollar.
Manufacturing productivity, output, and labor input
In most of the compared economies manufacturing productivity increased between 2 and 5 percent in 2006. The United States, with 2.4 percent growth, fell within that interval. However, in Taiwan, Germany, and Sweden labor productivity grew by over 6 percent, and in Korea by 10.8 percent. Manufacturing productivity increased by only 0.3 percent in Australia and by 1.4 percent in Italy. Canada is the only economy that had no manufacturing productivity growth in 2006.
Manufacturing output increased in 14 of the 16 economies in 2006. Korea, Sweden, and Taiwan continued to be the leaders in the growth of output, as they have been for the last decade. In 2006, growth in manufacturing output in Germany, Norway and Denmark was also noticeably higher than their average annual rates of increase over the 1979-2006 period. The U.S. increase of 3.3 percent was also above its average annual increase since 1979 of 2.9 percent.
While 14 of the economies had increases in output in 2006, 9 economies had reductions in total hours worked in manufacturing. The United Kingdom had the greatest decline (-3.1 percent) in hours in 2006, followed by Korea (-2.1 percent) and France (-2.0 percent). Total hours worked increased in the United States by 0.9 percent, and by over 2 percent in Japan and Italy.
Manufacturing employment declined in 10 of the 16 economies in 2006. The United Kingdom experienced the steepest decline (-2.6 percent), followed by France (-2.0 percent). The decline was 0.5 percent in the United States.
Seven of the sixteen economies experienced decreases in average hours worked in 2006, seven registered increases, and two had no change. This compares to thirteen economies with declining average annual manufacturing hours over the 2000-2006 period. Korea and Taiwan had the greatest declines in average hours worked in 2006, while the United States had the largest increase of 1.4 percent.
Manufacturing hourly compensation and unit labor costs
Total labor compensation in manufacturing increased in all 16 economies in 2006, from 0.5 percent in France to 5.7 percent in Norway. For most, the increases were between 2 and 4 percent. Total labor compensation in U.S. manufacturing increased by 3.4 percent in 2006, and increased at a 3.6 percent average annual rate over the 1979-2006 period.
Hourly compensation in manufacturing also increased in all 16 economies in 2006. The greatest increases were in the United Kingdom
(7.0 percent), Korea (6.8 percent), and Australia (6.5 percent). Japan had the lowest rate of increase in 2006 (0.5 percent). The U.S. increase of 2.5 percent in hourly compensation was below its average annual increase since 1979.
Unit labor costs, expressed in national currencies, declined in nine countries in 2006, and increased in seven. The largest increase occurred in Australia (+6.2 percent) and the greatest decline was in Taiwan (-4.4 percent). Unit labor costs were about unchanged in U.S.
manufacturing at +0.1 percent.
Expressed in U.S. dollars, manufacturing unit labor costs increased in ten economies in 2006, and declined in six. The unit labor costs of
three economies, Korea, the Netherlands, and Spain, went from decreases to increases when computed on a U.S. dollar basis. This reversal happened because of the appreciation of their currencies versus the dollar. Korea, with the greatest currency appreciation, experienced the greatest reversal, from -3.6 to +3.5 percent.
Movements in exchange rates often are the dominant force behind changes in comparative unit labor costs and international competitiveness. In 2006 the U.S. dollar weakened against most of the currencies being compared. The only exceptions were Japan, Australia, and Taiwan, where the currencies depreciated against the dollar. This depreciation of the U.S. dollar against most currencies continues a trend that began after 2000. In 2006 the dollar fell by 0.9 percent against the euro, following a decline of 0.1 percent in 2005.
