Nonfarm Productivity Revised to 1.8% in Q4 2025; Annual Growth 2.1%

Nonfarm business sector labor productivity increased 1.8 percent in the fourth quarter of 2025, the U.S. Bureau of Labor Statistics reported, revised down from the previous estimate of 2.8 percent. Quarterly figures in this release are seasonally adjusted annualized rates. The downward revision arrived alongside an upward revision to hourly compensation, and together they lifted unit labor cost growth in the quarter to 4.4 percent from the 2.8 percent previously published. For the year as a whole, annual average productivity increased 2.1 percent from 2024 to 2025.

The Revised Fourth-Quarter Print

This is the revised estimate for the fourth quarter of 2025, not a preliminary one. It is built on more recent source data from BLS, the Bureau of Economic Analysis, and the Board of Governors of the Federal Reserve System. Nonfarm business sector productivity increased 1.8 percent rather than the previously published 2.8 percent, reflecting a 1.1-percentage point downward revision to output; hours worked were not revised.

Productivity growth in the nonfarm business sector slowed from 5.2 percent in the third quarter of 2025 to 1.8 percent in the fourth. Measured from fourth-quarter 2024 to fourth-quarter 2025, nonfarm business productivity increased 2.5 percent — a four-quarter figure, and a distinct quantity from the 1.8 percent quarterly annualized rate.

The revision pattern is worth separating from the level. Productivity was marked down, but the source of the markdown was output, not hours: output for the quarter was revised to an increase of 1.5 percent from 2.6 percent, while hours worked held at a decrease of 0.2 percent in both vintages.

Unit Labor Costs and Compensation

Unit labor costs in the nonfarm business sector increased 4.4 percent in the fourth quarter of 2025, reflecting a 6.3-percent increase in hourly compensation and a 1.8-percent increase in productivity. BLS calculates unit labor costs as the ratio of hourly compensation to labor productivity: increases in hourly compensation tend to raise unit labor costs, and increases in productivity tend to reduce them. Over the last four quarters, unit labor costs increased 2.4 percent.

Unit labor costs were revised up 1.6 percentage points to an increase of 4.4 percent, reflecting a 1.0-percentage point downward revision to productivity and a 0.6-percentage point upward revision to hourly compensation. The third quarter was revised on the same side: nonfarm business unit labor costs there were revised up 2.8 percentage points to an increase of 1.0 percent, reflecting a 2.9-percentage point upward revision to hourly compensation.

Real hourly compensation, which takes into account consumer prices, increased 3.7 percent in the fourth quarter of 2025 and increased 2.1 percent over the last four quarters. The labor share — the percentage of output that accrues to workers in the form of compensation — was 54.4 percent in the fourth quarter of 2025.

Output and Hours

Productivity is a ratio, and in the fourth quarter the numerator did the work. Output increased 1.5 percent while hours worked decreased 0.2 percent. Productivity growth built on rising output with roughly flat hours is a different economic signal from productivity growth manufactured by a sharp contraction in hours.

Over the current business cycle, which began in the fourth quarter of 2019, nonfarm business labor productivity has grown at an annualized rate of 2.1 percent, reflecting a 2.6-percent rate of growth in output and a 0.4-percent rate of growth in hours worked.

Manufacturing Runs the Other Way

Manufacturing diverged sharply from the nonfarm business aggregate. Manufacturing sector labor productivity decreased 2.5 percent in the fourth quarter of 2025, as output decreased 2.8 percent and hours worked decreased 0.3 percent. That estimate was revised down 0.6 percentage point from the previously published decrease of 1.9 percent, reflecting a 0.6-percentage point downward revision to output; hours worked were not revised.

The two manufacturing subsectors both lost ground, for different reasons.

• Durable manufacturing: productivity decreased 3.3 percent, reflecting a 2.6-percent decrease in output and a 0.7-percent increase in hours worked.
• Nondurable manufacturing: productivity decreased 1.2 percent, as output decreased 3.1 percent and hours worked decreased 1.9 percent.
• Total manufacturing, four-quarter basis: productivity increased 2.1 percent from the same quarter a year ago.

Falling productivity raises unit labor costs when compensation growth does not fall with it, and manufacturing is the clean illustration this quarter. Unit labor costs in the total manufacturing sector increased 9.1 percent in the fourth quarter of 2025, reflecting a 6.3-percent increase in hourly compensation and a 2.5-percent decrease in productivity. Manufacturing unit labor costs increased 2.9 percent from the same quarter a year ago.

BLS notes that the concepts, sources, and methods used for the manufacturing output series differ from those used in the business and nonfarm business output series, and that these output measures are not directly comparable.

Nonfinancial Corporations

The nonfinancial corporate sector estimates cover the third quarter of 2025, one quarter behind the other sectors in this release. Nonfinancial corporate sector labor productivity increased 4.5 percent in the third quarter of 2025, as output increased 5.2 percent and hours worked increased 0.6 percent, and increased 3.8 percent over the last four quarters. Unit labor costs in the sector increased 1.2 percent in the third quarter, reflecting a 5.8-percent increase in hourly compensation and a 4.5-percent increase in productivity, and increased 1.4 percent over the last four quarters. Unit profits of nonfinancial corporations increased 6.6 percent in the third quarter of 2025 and decreased 0.3 percent over the last four quarters.

Annual Averages for 2025

Annual average nonfarm business sector productivity increased 2.1 percent from 2024 to 2025, revised down 0.1 percentage point, as output was revised down 0.1 percentage point to an increase of 2.5 percent. Hours worked in 2025 were unrevised.

• Nonfarm business unit labor costs: revised up 0.4 percentage point to an increase of 2.3 percent in 2025, reflecting an upward revision of 0.4 percentage point in hourly compensation and a 0.1-percentage point downward revision to productivity.
• Nonfarm business real hourly compensation: increased 1.8 percent in 2025.
• Manufacturing productivity: revised down 0.1 percentage point to an increase of 1.9 percent in 2025, as output was revised down 0.1 percentage point to an increase of 1.0 percent, with hours worked decreasing 0.9 percent.
• Manufacturing unit labor costs: revised up 0.1 percentage point to an increase of 2.4 percent in 2025, against 4.7 percent in 2024.
• Manufacturing real hourly compensation: increased 1.7 percent in 2025.

Set against the preceding four years, the 2025 annual average productivity figure of 2.1 percent sits alongside 3.0 percent in 2024 and 2.0 percent in 2023, a decrease of 1.5 percent in 2022, and an increase of 2.1 percent in 2021. The annual series has spent the post-2022 stretch back in positive territory, and the cost side has come down with it: nonfarm business unit labor costs of 2.3 percent in 2025 sit against 2.4 percent in 2024, 2.0 percent in 2023, and 5.2 percent in 2022.

A Note on Publication Timing

BLS states that publication of this release was delayed due to a lapse in appropriations. Productivity and costs data are not collected directly; they are calculated using source data from other BLS programs and government agencies, and the release states that the data presented were produced once all required source data became available.

What to Watch

The preliminary Productivity and Costs news release for first-quarter 2026 is scheduled for Thursday, May 7, 2026. The figure that will settle the current question is nonfarm business unit labor costs. Two consecutive quarters have now been revised upward on the cost side — the third quarter of 2025 by 2.8 percentage points and the fourth by 1.6 percentage points — and in both cases the revision came primarily from hourly compensation rather than from productivity.

If the preliminary first-quarter estimate shows unit labor cost growth holding near the 4.4 percent pace of the fourth quarter rather than settling back toward the 2.3 percent annual average for 2025, the cost-push interpretation gains ground. If instead productivity growth reaccelerates toward the 2.1 percent annualized rate the nonfarm business sector has sustained since the fourth quarter of 2019, compensation growth of the current size stays affordable without feeding into prices.