Nonfarm business sector labor productivity grew at an annualized rate of 0.3% in the first quarter of 2026, the Bureau of Labor Statistics said Thursday, a larger-than-expected downward revision from the preliminary estimate of 0.8%.
Output growth was the main factor behind the revision, falling to 1.0% from the prior estimate of 1.5%, while hours worked held steady at 0.7%. A Reuters survey of economists had placed the expected revision at a 0.5% rate.
The first-quarter reading for nonfarm business unit labor costs came in at a 1.8% annualized rate, trimmed from an earlier estimate of 2.3%. Hourly compensation increased 2.1% in the quarter. The result fell well short of the 2.5% rate that economists surveyed by Reuters had anticipated.
For the fourth quarter of 2025, unit labor costs were marked down sharply, to 2.1% from an initial figure of 4.6%. Nonfarm business productivity in that quarter was unrevised at 1.6%.
Measured from a year earlier, nonfarm business productivity grew 2.8% in the first quarter. Since the fourth quarter of 2019, productivity has grown at an annualized rate of 2.1%, matching the long-term rate recorded since the first quarter of 1947, the bureau said.
Real hourly compensation, which accounts for consumer prices, fell 1.4% in the first quarter. The labor share — the portion of output that goes to workers as compensation — stood at 53.7% in the first quarter, the lowest recorded value since the bureau began tracking the series in 1947.
In the manufacturing sector, productivity grew 3.2% in the first quarter, revised down from an initial estimate of 3.6%. Durable manufacturing productivity rose 5.5%, while nondurable manufacturing productivity increased 0.9%.
Underlying the productivity revision was a broader slowdown in economic output: GDP expanded at a 1.6% annual rate in the first quarter after an initial reading of 2.0%. That GDP revision was driven by weaker investment and consumer spending, the Bureau of Economic Analysis said. The softness in first-quarter output underpinned the productivity revision, the bureau noted.
The Bureau of Labor Statistics is scheduled to release preliminary second-quarter 2026 productivity and costs data on Aug. 6, 2026.