“Nonfarm business sector labor productivity decreased 0.8 percent in the first quarter of 2025, the US 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. 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. 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,” says the Bureau of Labor Statistics in the quarterly productivity update.
For comparison, Q1 2024 saw nonfarm business sector labor productivity up 0.2 percent at an annualized rate, as output up 0.9 percent, and hours worked increased by 0.6 percent over Q4 2023.