Changes in unit labor costs can be expressed either in national currency units or in U.S. dollars. Expressed in national currency units, manufacturing unit labor costs increased in ten and declined in seven of the economies in 2007. The decline for the United States (-1.1 percent) was the fifth steepest decline among the economies compared. However, expressed in U.S. dollars, manufacturing unit labor costs increased in 14 of the economies and declined in 3, including the United States. The U.S. manufacturing sector improved its competitiveness against all economies compared except Taiwan and Japan. Declines in the dollar's exchange rate reversed the direction of movement in four countries and had the largest impact on Australia, from +3.2 percent increase in unit labor costs in national currency to +15.0 percent increase in unit labor costs expressed in U.S. dollars. This difference can be explained by the strong appreciation of the Australian dollar relative to the U.S. dollar.
Manufacturing productivity, output, and labor input
In 2007, manufacturing productivity increased in 14 of the 17 economies compared. The United States increase of 4.7 percent was the fourth largest among the 17 economies. This increase was slightlya bove the 4.0 percent U.S. average annual increase since 1979. Korea and Taiwan led in productivity growth (+8.7 percent each), followed by Germany (+4.9 percent). Singapore's productivity decline of 4.0 percent significantly exceeded the declines in Italy and Norway (-0.5 and -0.2 percent respectively). Among the economies compared, Singapore also recorded the largest reversal from high manufacturing productivity growth rates in the nineties to the steepest decline in 2007.
Between 2000 and 2007, productivity gains in the U.S. manufacturing sector were mainly due to declines in total hours. To a lesser degree, the productivity gains of the European manufacturing sectors compared here were also due to declines in total hours. By contrast, productivity gains in Korea and Taiwan were mainly due to increases in output.
Manufacturing output increased in 16 of the 17 economies in 2007. Taiwan was the leader in the growth of output with a +10.4 percent increase. In 2007, growth in manufacturing output in Germany, Norway, and Taiwan was noticeably higher than their average annual rates of increase over the 1979-2007 period, while the U.S. increase remained at 2.9 percent. Canada was the only economy that had a decline (-0.9 percent) in manufacturing output in 2007.
While 16 of the manufacturing economies had increases in 2007 in output, 10 had increases in total hours worked. Singapore and Norway had the largest increases in total hours worked of 10.2 and 5.5 percent, respectively. Canada had the steepest decline (-3.5 percent) in hours in 2007. The United States and Belgium had the fourth steepest decline in hours worked (-1.7 percent).
For the period 2000-2007, total hours worked in manufacturing declined in 16 of the 17 economies. The United Kingdom had the steepest average annual decline (-3.9 percent), followed by the United States (-3.1 percent). Singapore was the only economy that experienced growth (+3.7 percent) in total hours worked in this period.
In 2007, manufacturing employment increased in 10 of the 17 economies. Singapore had the largest increase in employment (+9.9 percent) - almost double the next largest growth in Norway (+5.0 percent). Canada had the largest decline in employment (-3.4 percent), followed by the United Kingdom (-2.2 percent) and the United States (-1.7 percent).
Over the 2000-2007 period, the United Kingdom and the United States experienced the steepest average annual declines in manufacturing employment (-4.0 and -3.0 percent respectively).
In 2007 average hours worked in manufacturing declined in 7 of the 17 economies and increased in 8, while the United States and France showed no change in average hours worked. This compares to 11 economies with declining average annual hours over the 2000-2007 period.
Manufacturing hourly compensation and unit labor costs
Total labor compensation in manufacturing increased in 14 of the 17 economies in 2007. The largest increases were in Norway (+10.5 percent) and Sweden (+6.7 percent). U. S. compensation rose by 1.7 percent. Total labor compensation declined in the United Kingdom, Canada and Japan.
Hourly compensation in manufacturing increased also in 15 of the 17 economies in 2007, with Singapore and Japan as the exceptions. The largest increase was in Korea (+7.8 percent), followed by Australia and Belgium (+5.3 percent each). The U.S. increase of 3.5 percent in hourly compensation was below its average annual increase since 1979.
Expressed in national currencies, unit labor costs increased in ten economies in 2007 and decreased in seven. The largest increase occurred in Norway (+5.0 percent) and the largest decline was in Taiwan (-5.2 percent). Unit labor costs in U.S. manufacturing decreased by 1.1 percent, compared to an average annual increase of 0.6 percent since 1979.
Expressed in U.S. dollars, manufacturing unit labor costs increased in 14 economies in 2007 and declined in 3, including the United States. Steeper declines occurred in Taiwan and Japan. Thus, the manufacturing sector in the United States improved its cost competitiveness against all economies compared except Taiwan and Japan.
The unit labor costs of four economies, Germany, the United Kingdom, Singapore, and Korea, went from decreases to increases when computed on a U.S. dollar basis. Australia and Norway had the largest currency appreciations in 2007. Australia also showed the largest difference, from +3.2 percent increase in unit labor costs in national currency to +15.0 percent increase in unit labor costs expressed in U.S. dollars.
Movements in exchange rates are often the dominant force behind changes in comparative unit labor costs and international competitiveness. In 2007, the U.S. dollar weakened against most of the currencies being compared. The exceptions were the currencies of Japan and Taiwan, which depreciated against the dollar. This depreciation of the U.S. dollar against most currencies continues a trend that began in 2001. In 2007, the dollar fell 9.1 percent against the euro, following a decline of 0.9 percent in 2006.
Trade-weighted unit labor costs
BLS constructs indexes of U.S. unit labor cost trends relative to a competitors' index, which is a trade-weighted average of unit labor cost trends in the other economies, in order to take account of differences in the relative importance of foreign economies to U.S. trade in manufactured goods. Relative trade-weighted unit labor cost indexes are calculated on both a national currency and a U.S. dollar basis.
In this release, the relative U.S. trade-weighted indexes are estimated against 14 economies for which comparable data are available over the period of comparison. Australia and Singapore have been omitted because unit labor cost data are not available before
1990.
In the chart, the dotted line shows that, on a national currency basis, U.S. unit labor costs tended to fall more or increase less than unit labor costs in the other economies from 1979 until 1998. After that, the year-to-year fluctuations do not follow a clear trend.
The solid line compares the unit labor costs on a U.S. dollar basis. From 1979 to 1985, and again from 1995 to 2001, U.S. unit labor costs on a U.S. dollar basis generally rose more or declined less than in the other economies, due to the appreciation of the dollar. Since 2001, relative U.S. unit labor costs declined with the weakening of the U.S. dollar.
