2025 First Quarter (Revised) 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, Revised

Nonfarm business sector labor productivity decreased 1.5 percent in the first quarter of 2025, the U.S. Bureau of Labor Statistics reported today, as output decreased 0.2 percent and hours worked increased 1.3 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 1.3 percent in the first quarter of 2025. (See tables A1 and 2.)

Unit labor costs in the nonfarm business sector increased 6.6 percent in the first quarter of 2025, reflecting a 5.0-percent increase in hourly compensation and a 1.5-percent decrease in productivity. Unit labor costs increased 1.9 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 1.2 percent in the first quarter of 2025, and increased 0.5 percent 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 4.4 percent in the first quarter of 2025, as output increased 4.8 percent and hours worked increased 0.4 percent. This is the largest increase in productivity since the second quarter of 2021, when the measure increased 5.3 percent. In the durable manufacturing sector, productivity increased 7.2 percent, reflecting a 7.9-percent increase in output and a 0.6-percent increase in hours worked. Nondurable manufacturing sector productivity increased 1.7 percent, as output increased 1.7 percent and hours worked saw no growth. Total manufacturing sector productivity increased 1.4 percent from the same quarter a year ago. (See tables A1, 3, 4, and 5.)

Unit labor costs in the total manufacturing sector increased 2.0 percent in the first quarter of 2025, reflecting a 6.4-percent increase in hourly compensation and a 4.4-percent increase in productivity. Manufacturing unit labor costs increased 0.3 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 4.4 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 first-quarter 2025 measures were announced today for the nonfinancial corporate sector. Productivity decreased 1.2 percent in the first quarter of 2025 as output decreased 0.3 percent and hours worked increased 0.9 percent. Productivity increased 2.0 percent over the last four quarters. (See tables A2 and 6.)

Revised measures

Measures released today are based on more recent source data than were available for the preliminary report; they reflect regular updates of source data from the BLS, the Bureau of Economic Analysis (BEA), and the Board of Governors of the Federal Reserve System.

In the first quarter of 2025, nonfarm business sector productivity decreased 1.5 percent, a 0.7- percentage point downward revision from the previously reported decrease of 0.8 percent. Output was revised up 0.1 percentage point to a decrease of 0.2 percent and hours worked were revised up 0.7 percentage point to an increase of 1.3 percent. Unit labor costs increased 6.6 percent rather than increasing 5.7 percent as previously reported, reflecting a 0.2-percentage point upward revision to hourly compensation and a 0.7-percentage point downward revision to labor productivity.

In the manufacturing sector, productivity was revised down in the first quarter of 2025 from a 4.5- percent increase to a 4.4-percent increase, reflecting a 0.3-percentage point downward revision to output and a 0.1-percentage point downward revision to hours worked. Manufacturing unit labor costs increased 2.0 percent rather than the preliminary estimate of 1.6 percent, the combined effect of a 0.2- percentage point upward revision to hourly compensation and a 0.1-percentage point downward revision to productivity.

In the fourth quarter of 2024, labor productivity growth in the nonfarm business sector remained at 1.7 percent, as both output and hours worked were unrevised. Hourly compensation, however, was revised up from the previously reported increase of 3.7 percent to an increase of 5.5 percent. As a result, unit labor costs increased 3.8 percent in the fourth quarter of 2024, rather than 2.0 percent as previously reported.

Labor productivity in the manufacturing sector was revised down 0.2 percentage point to an increase of 0.1 percent, the result of a 0.1-percentage point downward revision to output, which declined at a 1.4- percent rate. Hours worked were unrevised, decreasing 1.6 percent in the fourth quarter. Manufacturing sector unit labor costs had a 1.8-percentage point downward revision, from an increase of 3.8 percent to an increase of 2.0 percent, resulting from a 1.9-percentage point downward revision to hourly compensation and a 0.2-percentage point downward revision to productivity.

In the nonfinancial corporate sector, productivity grew 5.9 percent in the fourth quarter of 2024 rather than 4.9 percent as previously reported, due to a 1.0-percentage point upward revision to output; hours worked were unrevised.

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 7.2 7.9 0.6 7.2 3.3 0.0 manufacturing A year ago 1.3 0.3 -1.1 1.3 -1.4 0.0

Nondurable Previous quarter 1.7 1.7 0.0 4.9 1.0 3.1 manufacturing A year ago 1.1 1.8 0.6 2.8 0.1 1.7

Nonfinancial Previous quarter -1.2 -0.3 0.9 4.3 0.5 5.5 corporate A year ago 2.0 2.8 0.8 3.1 0.4 1.1