US labor productivity fell at a quarterly annualized rate of -0.8% in Q1 2025, the first decline since Q2 2022 and mostly in line with expectations of a -0.7% decline.

• Total output fell at a -0.3% rate while hours worked increased at a 0.6% rate.
• On an annual basis, productivity was up 1.4% YoY with output up 2.2% YoY and hours worked up 0.8% YoY.
• Hourly compensation increased at a quarterly annualized rate of 4.8% which means that unit labor costs surged in Q1 2025, up at an annualized rate of 5.7% (vs 5.1% expected), the strongest increase since Q1 2024.
• While overall nonfarm business productivity declined, manufacturing productivity increased at a quarterly annualized rate of 4.5% as output grew 5.1% and hours worked was up 0.5%.
• Manufacturing unit labor costs increased at a 1.6% annualized rate and were up 0.7% YoY.