Economic Buzz: US labor productivity growth revised lower, labor costs rise in fourth quarter

US worker productivity growth slowed more than earlier estimated in the fourth quarter, according to new government data. Nonfarm productivity, which measures output per hour, rose at a revised annualized rate of 1.8%, down from initial estimates. This marked a sharp slowdown from the third quarter?s strong 5.2% growth.

On a yearly basis, productivity increased 2.5%, while overall growth for 2025 stood at 2.1%. The data release had been delayed due to last year?s government shutdown.

The revision follows a downgrade in fourth-quarter economic growth, with GDP now estimated to have expanded at a 0.7% rate instead of the previously reported 1.4%.

At the same time, labor costs rose more than expected. Unit labor costs, which measure the cost of labor per unit of output, increased at a 4.4% annualized rate in the fourth quarter, significantly higher than the earlier estimate of 2.8%.

Compared to a year ago, unit labor costs rose 2.4%. However, growth in the third quarter was revised lower to 1.0% from 1.8%. For the full year 2025, unit labor costs increased by 2.3%.

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