US productivity slows in fourth quarter

WASHINGTON, March 5 (Reuters) – U.S. worker productivity slowed in the fourth quarter, but the trend remained solid, keeping growth in labor costs in check.

Nonfarm productivity, which measures hourly output per worker, increased at a 2.8% annualized rate last quarter after rising at an upwardly revised 5.2% pace in the third quarter, the Labor Department‘s Bureau of Labor Statistics said on Thursday. Economists polled by Reuters had forecast productivity increasing at a 1.9% rate after advancing at a previously reported 4.9% pace in the July-September quarter.

Productivity growth in the second quarter was slightly revised up to a 4.2% rate from the previously reported 4.1% pace. Productivity grew at a 2.8% rate from a year ago. It increased 2.2% in 2025.

The report was delayed by last year’s government shutdown.

The slowdown in quarterly productivity was flagged by a sharp moderation in gross domestic product growth in the fourth quarter to a 1.4% rate from a 4.4% pace in the July-September quarter. Economists expect the rapid adoption of artificial intelligence will boost productivity and rein in labor costs.

Unit labor costs – the price of labor per single unit of output – increased at a 2.8% rate last quarter after declining at a revised 1.8% pace in the third quarter. Economists had forecast labor costs rebounding at a 2.0% pace after contracting at a previously reported 1.9% rate.

They fell at an unrevised 2.9% rate in the second quarter.

Labor costs grew at a 1.3% rate from a year ago. They increased 1.9% in 2025.

(Reporting by Lucia Mutikani)