US Bureau of Labor Statistics reports that in Q2 2025, US nonfarm labor productivity rose 2.4% as output grew faster than hours worked. Unit labor costs increased 1.6%, driven by higher hourly compensation. Manufacturing productivity rose 2.1%, with durable goods leading gains. Over the current business cycle, productivity trends remain stronger than in the previous cycle but below long-term averages. Revised Q1 data showed downward adjustments to productivity and upward revisions to labor costs across several sectors. The BLS writes:
Nonfarm business sector labor productivity increased 2.4 percent in the second quarter of 2025, the U.S. Bureau of Labor Statistics reported today, as output rose 3.7 percent and hours worked increased 1.3 percent. All quarterly percent changes in this release are seasonally adjusted annualized rates. Compared to the same quarter a year ago, nonfarm business sector labor productivity rose 1.3 percent in the second quarter of 2025.
Unit labor costs in the nonfarm business sector increased 1.6 percent in the second quarter, reflecting a 4.0 percent increase in hourly compensation and a 2.4 percent rise in productivity. Over the past four quarters, unit labor costs increased 2.6 percent. The BLS calculates unit labor costs as the ratio of hourly compensation to labor productivity. In general, increases in hourly compensation tend to raise unit labor costs, while increases in productivity tend to reduce them. Real hourly compensation, which accounts for consumer prices, increased 2.3 percent in the second quarter and rose 1.4 percent over the past year.
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, which began in the fourth quarter of 2019, labor productivity has grown at an annualized rate of 1.8 percent, reflecting a 2.4 percent growth rate in output and a 0.6 percent growth in hours worked. This 1.8 percent rate is higher than the 1.5 percent growth seen in the previous business cycle (Q4 2007 to Q4 2019), though it remains below the long-term average of 2.1 percent since Q1 1947.
In the manufacturing sector, labor productivity increased 2.1 percent in the second quarter of 2025, as output grew 2.3 percent and hours worked rose 0.3 percent. In the durable goods manufacturing sector, productivity climbed 3.3 percent due to a 4.1 percent increase in output and a 0.8 percent increase in hours worked. Nondurable goods manufacturing productivity increased 1.2 percent, with output up 0.5 percent and hours worked down 0.7 percent. Overall, manufacturing productivity increased 1.5 percent from the same quarter a year ago—the largest four-quarter gain since Q2 2021, when it rose 4.8 percent.
Unit labor costs in the total manufacturing sector rose 1.7 percent in the second quarter of 2025, as hourly compensation increased 3.8 percent and productivity rose 2.1 percent. In the nondurable goods sector, unit labor costs rose 3.8 percent, while they declined 0.2 percent in durable goods. Overall, manufacturing unit labor costs increased 2.5 percent from the same quarter a year earlier.
Manufacturing sector labor productivity has grown at an annualized rate of 0.5 percent during the current business cycle, with output increasing 0.2 percent and hours worked decreasing 0.3 percent. This 0.5 percent growth rate is above the 0.1 percent rate seen in the previous cycle (Q4 2007 to Q4 2019) but remains below the long-term average of 2.1 percent since Q1 1987. It is important to note that the concepts, sources, and methods used for manufacturing output differ from those used in business and nonfarm business output series; therefore, the figures are not directly comparable. For more details, see the Technical Notes.
Revised Measures
Regular updates of source data published in June and July by the BLS and the Bureau of Economic Analysis (BEA) are reflected in revised data for all sectors for the first quarter of 2025. However, labor data published by BLS on August 1, 2025, have not yet been incorporated. Updates from the Federal Reserve Board are also reflected in revised data for manufacturing sectors for Q4 2024 and Q1 2025.
Table B1 presents revised and previously published productivity and related measures for the nonfarm business, business, and manufacturing sectors for Q1 2025, while Table A2 covers the nonfinancial corporate sector.
In the nonfarm business sector, productivity was revised down 0.3 percentage point to a 1.8 percent decline in Q1 2025. Output was revised down 0.4 percentage point to a 0.6 percent decline, and hours worked were revised down 0.1 point to a 1.2 percent increase. This productivity revision led to a 0.3-point upward revision in unit labor costs to a 6.9 percent increase; hourly compensation remained unchanged.
Manufacturing sector productivity was revised down 1.1 percentage points to a 3.3 percent increase in Q1 2025, driven by a downward revision to output; hours worked were not revised. Productivity in the durable goods subsector was revised down 0.4 points to a 6.8 percent increase. The previous estimate of a 1.7 percent increase in nondurable goods productivity was revised down to no change. As a result, manufacturing unit labor costs were revised up 0.9 percentage point to a 2.9 percent increase, while hourly compensation was revised down 0.1 point.
In the nonfinancial corporate sector, productivity was revised up 1.0 point to a 0.2 percent decrease in Q1 2025, due to a 0.9 point upward revision in output and a 0.1 point downward revision in hours worked. Unit labor costs in this sector were revised down 0.9 point to a 4.6 percent increase.
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