US Q4 productivity growth revised sharply lower

[WASHINGTON] US worker productivity growth slowed more than initially thought in the fourth quarter, government data showed, boosting growth in unit labour costs.

Nonfarm productivity, which measures hourly output per worker, increased at a downwardly revised 1.8 per cent annualised rate last quarter, the Labor Department’s Bureau of Labor Statistics said on Tuesday (Mar 24).

Economists polled by Reuters had expected productivity growth would be revised down to a 2.0 per cent rate from the previously reported 2.8 per cent pace.

Productivity grew at a 2.5 per cent rate from a year ago. Third-quarter productivity grew at an unrevised 5.2 per cent rate. Productivity increased 2.1 per cent in 2025. The report was delayed by last year’s government shutdown.

The downward revisions to quarterly productivity were telegraphed by a sharp downgrade to gross domestic product growth in the fourth quarter, to a 0.7 per cent rate from the initially estimated 1.4 per cent pace.

Economists believe the adoption of artificial intelligence will boost productivity and rein in labour costs. Unit labour costs – the price of labour per single unit of output – increased at a 4.4 per cent rate last quarter. That figure was revised up from the initially estimated 2.8 per cent pace.

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Economists had forecast growth in unit labour costs would be revised up to a 3.5 per cent rate. They grew at a 2.4 per cent rate from a year ago. Growth in unit labour costs for the third quarter was revised down to a 1.0 per cent pace from a 1.8 per cent rate. Unit labour costs increased 2.3% in 2025. REUTERS