US Labor Costs Fall Unexpectedly in Q3

Unit labor costs in the US nonfarm business sector declined by 1.9% in Q3 2025, in line with preliminary estimates, and extending the downward trend after a 2.9% drop in the previous quarter. The decline came as productivity rose 4.9%, outpacing a 2.9% increase in hourly compensation. In the manufacturing sector, unit labor costs rose 1.1%, reflecting a 3.7% rise in hourly compensation and a 3% improvement in productivity. On an annual basis, nonfarm unit labor costs rose 1.3%, while manufacturing unit labor costs were up 1.2%.

Unit labor costs in the US nonfarm business sector declined by 1.9% in Q3 2025, significantly below expectations of a 1.0% rise and extending the downward trend after a revised 2.9% drop in the previous quarter, preliminary estimates showed. The decline came as productivity rose 4.9%, outpacing a 2.9% increase in hourly compensation. In the manufacturing sector, unit labor costs rose 1.5%, reflecting a 4.8% rise in hourly compensation and a 3.3% improvement in productivity. On an annual basis, nonfarm unit labor costs rose 1.2%, while manufacturing unit labor costs were up 1.3%.

Unit labor costs in the US nonfarm business sector increased 1.0 percent in the second quarter of 2025, lower than preliminary estimates of 1.6 percent. It reflects a 4.3 percent increase in hourly compensation and a 3.3 percent increase in productivity. Unit labor costs increased 2.5 percent over the last four quarters. Meanwhile, unit labor costs in the total manufacturing sector increased 2.0 percent, reflecting a 4.5 percent increase in hourly compensation and a 2.5 percent increase in productivity. Manufacturing unit labor costs increased 2.6 percent from the same quarter a year ago.