Financial News: U.S. Labor Productivity Surges 3.3% In Q2, Much

U.S. Labor Productivity Surges 3.3% In Q2, Much More Than Previously Estimated

09/04/2025 - 10:15:00 (RTTNews)

(RTTNews) - A report released by the Labor Department on Thursday showed labor productivity in the U.S. surged by much more than previously estimated in the second quarter of 2025.

The Labor Department said labor productivity shot up by 3.3 percent in the second quarter compared to the previously reported 2.4 percent jump. Economists had expected the increase in labor productivity to be unrevised.

The unexpectedly stronger than previously estimated growth by productivity, a measure of output per hour, came as output spiked by 4.4 percent compared to the previously reported 3.7 percent surge.

The report also showed the increase in hours worked in the second quarter was downwardly revised to 1.1 percent from 1.3 percent.

The sharp increase by labor productivity in the second quarter came following a 1.8 percent slump in the first quarter, which marked the first decline since the second quarter of 2022.

"With labor force growth slowing, productivity will be key to determining the economy's speed limit and inflationary dynamics," said Nancy Vanden Houten, Lead U.S. Economist at Oxford Economics.

She added, "If productivity growth re-accelerates due to tax cuts, deregulation, and technological advancements, including AI, economic growth can pick up without causing unwanted inflation."

Meanwhile, the Commerce Department said unit labor costs climbed by 1.0 percent in the second quarter compared to the previously reported 1.6 percent growth. The increase in unit labor costs was expected to be unrevised.

The unexpected downward revision came as the much stronger than previously estimated productivity growth more than offset an upward revision to the surge in hourly compensation to 4.3 percent from 4.0 percent.

Real hourly compensation, which takes changes in consumer prices into account, also shot up by 2.6 percent compared to the previously reported 2.3 percent jump.

The downwardly revised increase in unit labor costs in the second quarter came following a 6.9 percent spike in the first quarter.

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