Labor productivity in the U.S. grew by much more than expected in the third quarter of 2025, according to a report released by the Labor Department on Thursday.
The Labor Department said labor productivity soared by 4.9 percent in the third quarter after spiking by an upwardly revised 4.1 in the second quarter.
Economists had expected labor productivity to surge by 3.6 percent compared to the 3.3 percent jump that had been reported for the previous quarter.
The sharp increase in labor productivity, a measure of output per hour, came as output skyrocketed by 5.4 percent and hours worked rose by just 0.5 percent.
“Productivity growth posted a sizeable gain in Q3, while annual revisions released in the report indicate stronger gains over the prior five years,” said Matthew Martin, Senior US Economist at Oxford Economics.
He added, “The latest figures suggest firms are successfully doing more with less labor, giving more credence to a jobless expansion.”
Meanwhile, the report said unit labor costs slumped by 1.9 percent in the third quarter after tumbling by a revised 2.9 percent in the second quarter.
Unit labor costs were expected to climb by 0.8 percent compared to the 1.0 percent increase that had been reported for the previous quarter.
The unexpected decrease by unit labor costs came as the surge in productivity more than offset a 2.9 percent jump in hourly compensation.
Real hourly compensation, which takes changes in consumer prices into account, edged down by 0.2 percent during the quarter.
“Unit labor costs trended lower during 2025 as workers lost leverage in seeking higher wages amid a weak hiring environment,” said Martin. “The trend in unit labor costs is consistent with a moderate pace of services inflation.”
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