Nonfarm business labor productivity increased +2.8% QoQ (SAAR) and +2.8% YoY in Q4 2025 as output rose while hours worked declined, highlighting efficiency gains alongside rising compensation and unit labor costs.

• Nonfarm business productivity rose +2.8% QoQ (SAAR) in Q4 2025 as output increased +2.6% QoQ and hours worked declined -0.2% QoQ, indicating that productivity gains were driven by output growth occurring alongside a small decline in labor input.

• Hourly compensation increased +5.7% QoQ and +4.1% YoY, while real hourly compensation rose +3.1% QoQ and +1.3% YoY, showing nominal wage growth remained strong with more moderate real gains after adjusting for inflation.

• Unit labor costs in the nonfarm business sector increased +2.8% QoQ and +1.3% YoY, reflecting rising hourly compensation that was partially offset by the increase in productivity.

• The labor share of income was 53.8% in Q4 2025, the lowest level in the series dating back to 1947, indicating a smaller portion of output accruing to workers as compensation.

• Manufacturing productivity declined -1.9% QoQ as output fell -2.2% QoQ and hours worked declined -0.3% QoQ, showing reduced factory efficiency during the quarter.

• Durable manufacturing productivity fell -3.0% QoQ as output decreased -2.3% and hours worked increased +0.7%, while nondurable manufacturing productivity edged down -0.2% QoQ as both output (-2.1%) and hours (-2.0%) declined.

• Manufacturing unit labor costs rose sharply +8.3% QoQ, the largest increase since Q3 2022, as hourly compensation increased +6.2% while productivity declined.

• On an annual basis, nonfarm business productivity increased +2.2% in 2025 as output rose +2.6% and hours worked increased +0.4%, while manufacturing productivity increased +2.0% for the year, the strongest annual gain in the sector since 2010.