U.S. Labor Productivity Growth Slows Much Less Than Expected In Q4

(RTTNews) - Labor productivity in the U.S. surged by much more than expected in the fourth quarter of 2025, according to a report released by the Labor Department on Thursday.

The Labor Department said labor productivity shot up by 2.8 percent in the fourth quarter after soaring by an upwardly revised 5.2 percent in the third quarter.

Economists had expected labor productivity to jump by 1.9 percent in the fourth quarter compared to the 4.9 percent spike that had been reported for the previous quarter.

The bigger than expected increase in productivity, a measure of output per hour, came as output surged by 2.6 percent and hours worked edged down by 0.2 percent.

"Judging by recent trends in the data, US productivity growth continues to outstrip its advanced economy peers - a structural tailwind for its growth," said Nationwide Financial Market Economist Oren Klachkin.

He added, "We continue to look for solid productivity gains in 2026 as output growth outpaces employment."

The report said unit labor costs also jumped by 2.8 percent in the fourth quarter after tumbling by a revised 1.8 percent in the third quarter.

Unit labor costs were expected to shoot up by 2.1 percent compared to the 1.9 percent slump that had been reported for the previous quarter.

The bigger than expected rebound by unit labor costs came as hourly compensation spiked by 5.7 percent in the fourth quarter, more than offsetting the surge in productivity.

Real hourly compensation, which takes changes in consumer prices into account, shot up by 3.1 percent during the quarter.