📊 Total Factor Productivity for Detailed Industries – 2022

Total Factor Productivity (TFP) is a key measure of economic efficiency, capturing how well industries turn combined inputs—labor, capital, energy, materials, and services—into output. The U.S. Bureau of Labor Statistics’ 2022 report on TFP for detailed industries provides a granular look at productivity trends across 86 four-digit NAICS manufacturing industries in the United States. Here’s a concise summary of the main findings, trends, and implications for the U.S. economy.

Overview of Total Factor Productivity (TFP) 📈

TFP measures the portion of output not explained by the amount of inputs used in production. It reflects factors such as technological innovation, improvements in management, organizational changes, and workforce skills. In essence, TFP growth means industries are producing more with the same or fewer resources, signaling greater efficiency and competitiveness.

Key Findings from the 2022 Report

  1. Widespread Declines in Manufacturing TFP 🚨
    • In 2022, TFP fell in 66 out of 86 detailed manufacturing industries.
    • Durable goods manufacturing saw declines in 38 of 51 industries, with the HVAC and commercial refrigeration equipment industry experiencing the largest drop at -11.9%.
    • Nondurable goods manufacturing saw TFP fall in 28 of 35 industries, led by a -15.9% decline in paints, coatings, and adhesives.
  2. Industries with Notable TFP Gains 📈
    • Only 20 industries posted TFP increases in 2022.
    • Six industries achieved TFP growth above 7%:
      • 🟢 Glass and glass products (+13.1%)
      • 🟢 Leather and hide tanning and finishing (+10.2%)
      • 🟢 Apparel knitting mills (+9.4%)
      • 🟢 Animal slaughtering and processing (+9.3%)
      • 🟢 Communications equipment (+8.3%)
      • 🟢 Resin, rubber, and artificial fibers (+7.7%)
    • Among the ten largest manufacturing industries (by employment), four saw TFP increases: animal slaughtering and processing (+9.3%), aerospace products and parts (+4.6%), motor vehicle parts (+3.8%), and semiconductors/electronic components (+1.3%).
  3. Industries with the Largest TFP Declines ⬇️
    • Eight industries experienced TFP drops greater than 10%:
      • 🔴 Paints, coatings, and adhesives (-15.9%)
      • 🔴 Agricultural chemicals (-14.8%)
      • 🔴 HVAC and commercial refrigeration equipment (-11.9%)
      • 🔴 Spring and wire products (-11.8%)
      • 🔴 Pharmaceuticals and medicines (-11.0%)
      • 🔴 Electrical equipment (-10.7%)
      • 🔴 Boilers, tanks, and shipping containers (-10.7%)
      • 🔴 Iron and steel mills and ferroalloys (-10.6%)
  4. Output and Input Trends 🏭
    • Output increased in 42 of 86 industries, a sharp drop from 65 industries in 2021.
    • The largest output gains (over 15%) were seen in:
      • 🚗 Other electrical equipment and components (+24.6%)
      • 👕 Apparel knitting mills (+22.7%)
      • 🚄 Railroad rolling stock (+20.5%)
      • 🏗️ Steel products from purchased steel (+19.0%)
      • 📡 Communications equipment (+18.2%)
      • 🚙 Motor vehicles (+17.3%)
      • 🪟 Glass and glass products (+15.1%)
    • Combined inputs (capital, labor, intermediate inputs) rose in 60 industries, with hours worked increasing in 72 and intermediate inputs in 57.
  5. Long-Term and Cyclical Trends 🔄
    • TFP growth is often higher in years following recessions (e.g., 1992, 2003, 2010, 2021).
    • In recession years (1991, 2001, 2009, 2020), fewer industries saw TFP growth.
    • From 1987 to 2022, 79 of 86 industries posted labor productivity gains, with substitution of intermediate inputs for labor being the main driver.

Understanding TFP’s Role in Labor Productivity

  • TFP differs from labor productivity, which measures output per hour worked.
  • Labor productivity gains can result from TFP growth or from increased use of capital and intermediate inputs relative to labor.
  • In most industries, the substitution of intermediate inputs (like materials and services) for labor has been the leading source of labor productivity growth.

Implications for the U.S. Economy 💡

  • The broad-based decline in TFP across manufacturing in 2022 suggests challenges in efficiency, possibly due to lingering effects of the COVID-19 pandemic, supply chain disruptions, or slower technological adoption.
  • Industries with strong TFP growth—such as glass products, animal processing, and communications equipment—may be benefiting from innovation, automation, or improved management practices.
  • Monitoring TFP is crucial for understanding the underlying health and competitiveness of U.S. manufacturing, beyond what labor productivity alone can reveal.

Summary

The 2022 Total Factor Productivity for Detailed Industries report shows that most U.S. manufacturing industries experienced declines in productivity, with only a handful achieving significant gains. These trends highlight the importance of innovation, efficient resource use, and adaptability in maintaining economic growth and competitiveness. For policymakers and economists, TFP remains a vital indicator of the U.S. economy’s long-term potential.

References: 

Total Factor Productivity, US Bureau of Labor Statistics for Detailed Industries

Find out how the Factor Productivity for Detailed Industries report impacts you and your business.