Economic Buzz: US productivity growth slows in early 2026

Labor productivity in the U.S. nonfarm business sector rose at an annualized rate of just 0.3 percent in the first quarter of 2026, according to revised figures from the Bureau of Labor Statistics. Output increased 1.0 percent while hours worked grew 0.7 percent. Compared with a year earlier, productivity was up 2.8 percent, supported by a 3.2 percent rise in output.

Unit labor costs climbed 1.8 percent in the quarter as hourly compensation rose 2.1 percent, though real hourly pay fell 1.4 percent. Over the past year, unit labor costs edged up 0.5 percent. Since late 2019, productivity growth has averaged 2.1 percent annually, in line with the long-term trend.

Manufacturing showed stronger gains, with productivity up 3.2 percent as output rose 3.3 percent and hours held steady. Durable goods productivity surged 5.5 percent, while nondurable goods rose 0.9 percent. However, manufacturing unit labor costs increased 2.2 percent in the quarter and 3.4 percent year-over-year.

In the nonfinancial corporate sector, productivity rose 0.7 percent in the quarter and 3.6 percent over the year. The BLS also revised earlier estimates, lowering first-quarter productivity growth and reducing prior unit labor cost figures.

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