US Labor Costs Rise the Most in a Year

Unit labor costs in the U.S.

nonfarm business sector rose by 5.7% in the first quarter of 2025, surpassing market expectations of a 5.1% increase and accelerating sharply from a downwardly revised 2.0% gain in the previous period, according to a preliminary estimate.

This marked the largest quarterly rise in labor costs since an 8.3% jump in Q1 2024, driven by a 4.8% increase in hourly compensation and a 0.8% decline in productivity.

In the manufacturing sector, unit labor costs climbed 1.6%, reflecting a 6.2% rise in hourly compensation alongside a 4.5% increase in productivity.

On an annual basis, unit labor costs were up 1.3% in Q1, with manufacturing unit labor costs increasing by 0.7%.