US Productivity Growth Slows Below Forecasts

US nonfarm business sector labor productivity rose by 0.3% in Q1 2026, less than 0.8% in the preliminary estimate and compared to a 1.6% increase in the previous quarter. It is the smallest productivity gain in a year as output increased 1% and hours worked rose 0.7%, compared to 1.5% and 0.7% respectively in the first estimate. In the manufacturing sector, productivity surged by 3.2%, less than 3.6% in the previous release as output increased 3.3% and hours worked saw no growth. Durable manufacturing saw a 5.5% rise in productivity, in line with the preliminary estimate, reflecting a 5.8% increase in output and a 0.3% rise in hours worked. Nondurable manufacturing productivity increased by 0.9%, less than 2% initially expected, as output went up 0.5% and hours worked decreased 0.4%. Annually, US productivity rose by 2.8%, also below 2.9% in the first release, but the biggest annual gain since Q3 2024, reflecting an increase in output of 3.2% and a 0.4% rise in hours worked.

US nonfarm business sector labor productivity rose by 0.8% in the first quarter of 2026, a slowdown from the revised 1.6% increase in the previous quarter and below market expectations of 1.4%, according to preliminary estimates. Output grew by 1.5% (vs. 1.3% in Q4 2025), while hours worked increased by 0.7% after a 0.2% decline. In the manufacturing sector, productivity surged by 3.6%, driven by a 3.3% rise in output and a 0.4% reduction in hours worked. Durable manufacturing saw a 5.3% productivity gain, with output up 5.4% and hours worked rising slightly by 0.1%. Meanwhile, nondurable manufacturing productivity increased by 2.0%, as output grew by 0.9% and hours worked fell by 1.0%. Annually, US productivity rose by 2.9% in Q1 2026, the largest increase since Q3 2024, with output up 3.3% and hours worked increasing by 0.4%.

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.