US Labor Productivity Growth Slows to 1.8% in Q4 2025

US nonfarm business labor productivity grew 1.8% in Q4 2025, down from the preliminary estimate of 2.8% and sharply lower than the 5.2% surge in Q3. Output rose just 1.5% (revised from 2.6%), while hours worked dipped 0.2% after a slight increase in the prior quarter. In the manufacturing sector, productivity fell 2.5%, with output dropping 2.8% and hours worked declining 0.3%. Durable goods manufacturing saw a 3.3% productivity decline due to lower output and increased hours, while nondurable manufacturing productivity slipped 1.2% as both output and hours decreased. Annually, nonfarm productivity grew 2.5% in Q4, but full-year 2025 growth slowed to 2.1%, down from 3.0% in 2024, signaling a notable deceleration in efficiency gains.

Labor productivity in the US nonfarm business sector rose 2.8% in the fourth quarter of 2025, slowing from a sharp 5.2% increase in the previous quarter but exceeding market expectations of a 1.9% gain, according to preliminary estimates. Output expanded by 2.6%, down from a 5.4% rise in the third quarter, while hours worked edged down by 0.2% after increasing 0.2% in the prior period. Meanwhile, manufacturing productivity fell 1.9% during the quarter as output dropped 2.2% and hours worked declined 0.3%. Productivity in durable goods manufacturing decreased 3.0%, reflecting lower output and higher hours worked, while nondurable manufacturing productivity slipped 0.2% as both output and hours worked fell. On a year-over-year basis, nonfarm business productivity also rose 2.8% in Q4. For the full year 2025, average productivity growth came in at 2.2%, moderating notably from the 3.0% increase recorded in 2024.

Nonfarm business sector labor productivity in the US climbed by 4.9% in Q3 2025, following a 4.1% rise in the previous period, in line with the preliminary estimate. This marked the strongest advance since Q3 2023, as output surged 5.4% after a 5.2% rise in Q2, while hours worked went up 0.5%, following a 1% increase previously. Manufacturing sector labor productivity increased 3.7%, revised up from the preliminary estimate of 3.3%, as output increased by 3% while hours worked decreased by 0.7%. From the same quarter a year ago, nonfarm business sector labor productivity increased 1.9%, matching an earlier estimate. Total manufacturing sector productivity increased 2.4% from the same quarter a year ago, marking the largest gain since Q2 2021.