2025 First Quarter (Preliminary) Productivity and Costs

Historical release narrative reproduced from the official public-domain source. Statistical tables, standard technical appendices, administrative material and attendance rosters are omitted; formatting is adapted for reading. Figures retain the release's historical context and may have been revised. Consult the linked source for the complete document.

First Quarter 2025, Preliminary

Nonfarm business sector labor productivity decreased 0.8 percent in the first quarter of 2025, the U.S. Bureau of Labor Statistics reported today, as output decreased 0.3 percent and hours worked increased 0.6 percent. (All quarterly percent changes in this release are seasonally adjusted annualized rates.) This is the first decline in nonfarm business sector labor productivity since the second quarter of 2022. From the same quarter a year ago, nonfarm business sector labor productivity increased 1.4 percent in the first quarter of 2025. (See tables A1 and 2.)

Unit labor costs in the nonfarm business sector increased 5.7 percent in the first quarter of 2025, reflecting a 4.8-percent increase in hourly compensation and a 0.8-percent decrease in productivity. Unit labor costs increased 1.3 percent over the last four quarters. (See tables A1 and 2.)

BLS calculates unit labor costs as the ratio of hourly compensation to labor productivity. Increases in hourly compensation tend to increase unit labor costs and increases in productivity tend to reduce them. Real hourly compensation, which takes into account consumer prices, increased 1.0 percent in the first quarter of 2025, and was unchanged over the last four quarters.

Labor productivity, or output per hour, is calculated by dividing an index of real output by an index of hours worked by all workers, including employees, proprietors, and unpaid family workers. During the current business cycle, starting in the fourth quarter of 2019, labor productivity has grown at an annualized rate of 1.8 percent, reflecting a 2.4-percent rate of growth in output and a 0.6-percent rate of growth in hours worked. The 1.8-percent annualized rate of productivity growth in the current business cycle thus far is higher than the 1.5-percent rate of the previous business cycle from the fourth quarter of 2007 through the fourth quarter of 2019, and is below the long-term rate of 2.1 percent since the first quarter of 1947.

Manufacturing sector labor productivity increased 4.5 percent in the first quarter of 2025, as output increased 5.1 percent and hours worked increased 0.5 percent. The increase in productivity is the steepest since the second quarter of 2021, when the measure increased 5.3 percent. In the durable manufacturing sector, productivity increased 7.1 percent, reflecting a 7.9-percent increase in output and a 0.8-percent increase in hours worked. Nondurable manufacturing sector productivity increased 2.2 percent, as output increased 2.3 percent and hours worked increased 0.1 percent. Total manufacturing sector productivity increased 1.5 percent from the same quarter a year ago. (See tables A1, 3, 4, and 5.)

Unit labor costs in the total manufacturing sector increased 1.6 percent in the first quarter of 2025, reflecting a 6.2-percent increase in hourly compensation and a 4.5-percent increase in productivity. Manufacturing unit labor costs increased 0.7 percent from the same quarter a year ago. (See tables A1 and 3.)

Manufacturing sector labor productivity has grown at an annualized rate of 0.5 percent during the current business cycle, as output has increased 0.2 percent and hours have declined 0.3 percent. The 0.5- percent annualized rate of productivity growth in the current business cycle thus far is above the 0.1- percent rate of the previous business cycle from the fourth quarter of 2007 through the fourth quarter of 2019 and is below the long-term rate of 2.1 percent since the first quarter of 1987. The 4.5 percent increase in labor productivity in the first quarter of 2025 boosted the annualized growth rate for the current business cycle 0.2 percentage point, from 0.3 percent to 0.5 percent.

The concepts, sources, and methods used for the manufacturing output series differ from those used in the business and nonfarm business output series; these output measures are not directly comparable. See the Technical Notes for a more detailed explanation.

Preliminary fourth-quarter and annual 2024 measures were announced today for the nonfinancial corporate sector. Productivity increased 4.9 percent in the fourth quarter of 2024, as output increased 5.4 percent and hours worked increased 0.4 percent. From the fourth quarter of 2023 to the fourth quarter of 2024, nonfinancial corporate sector productivity increased 3.7 percent.

Revised measures

Hours and related measures--including labor productivity and hourly compensation--for all sectors were revised to incorporate updated ratios of hours worked to hours paid by detailed industry, provided by the BLS National Compensation Survey; indexes were subject to revision back to 2018. Measures of real hourly compensation for all sectors were also subject to revision from 2020 onward due to the incorporation of the revised Consumer Price Index Retroactive Series. Fourth quarter and annual average data for 2024 were revised to incorporate regular updates of source data on output and compensation published by the Department of Commerce on March 27, 2025. Manufacturing sector output for the third and fourth quarters of 2024 reflects revisions published by the Board of Governors of the Federal Reserve System on March 18 and April 16, 2025.

In the fourth quarter of 2024, nonfarm business sector productivity was revised up 0.2 percentage point to an increase of 1.7 percent, reflecting a 0.1-percentage point upward revision to output; hours worked were not revised. Nonfarm business unit labor costs were revised down 0.2 percentage point to an increase of 2.0 percent, reflecting a 0.1-percentage point downward revision to hourly compensation and the aforementioned 0.2-percentage point upward revision to labor productivity.

In the manufacturing sector, productivity, output, and hours worked for the fourth quarter of 2024 were not revised. Unit labor costs were revised up 0.1 percentage point to an increase of 3.8 percent. Although many measures were not revised for the manufacturing sector, the constituent durable and nondurable manufacturing sectors saw offsetting revisions. Labor productivity was revised down 0.6 percentage point in the durable manufacturing sector and up 0.6 percentage point in the nondurable manufacturing sector. Output was revised down 0.4 percentage point in the durable manufacturing sector and up 0.5 percentage point in the nondurable manufacturing sector. Hours worked were revised up 0.1 percentage point in the durable manufacturing sector and down 0.1 percentage point in the nondurable manufacturing sector. Lastly, unit labor costs were revised up 0.7 percentage point in the durable manufacturing sector and down 0.6 percentage point in the nondurable manufacturing sector (See table B1.)

The annual average rate of productivity growth in the nonfarm business sector in 2024 was revised up 0.1-percentage point to an increase of 2.8 percent; annual average productivity for the manufacturing sector was not revised. (See tables 2 and 3.)

Quarterly and annual data for all sectors from 2023 forward appear in tables 1-6. Full historical measures can be found on the Productivity and Costs home page: www.bls.gov/productivity/tables/.

Durable Previous quarter 7.1 7.9 0.8 7.0 3.1 0.0 manufacturing A year ago 1.3 0.3 -1.0 2.0 -0.7 0.7

Nondurable Previous quarter 2.2 2.3 0.1 4.6 0.8 2.4 manufacturing A year ago 1.3 2.0 0.7 2.7 0.0 1.4

Nonfinancial Previous quarter 4.9 5.4 0.4 4.5 1.4 -0.4 corporate A year ago 3.7 4.3 0.5 4.7 1.9 0.9