U.S. Labor Productivity Rebounds Roughly In Line With Estimates In Q2

(RTTNews) - Labor productivity in the U.S. saw a significant rebound in the second quarter of 2025, according to preliminary data released by the Labor Department on Thursday.

The report said labor productivity shot up by 2.4 percent in the second quarter after tumbling by a downwardly revised 1.8 percent in the first quarter.

Economists had expected labor productivity to surge by 2.5 percent compared to the 1.5 percent slump that had been reported for the previous quarter.

The rebound by labor productivity, a measure of output per hour, came as output spiked by 3.7 percent compared to a 1.3 percent increase by hours worked.

"The productivity outlook is crucial for inflation," said Michael Pearce, Deputy Chief U.S. Economist at Oxford Economics. "If productivity growth re-accelerates due to tax cuts, deregulation, and technological advancements, including AI, the economy would accelerate without causing inflation to rise."

He added, "By contrast, increased uncertainty, the deadweight loss from tariffs, and a cyclical slowdown in the economy could see productivity growth remain in the slow lane and would imply upside risk to inflation."

The Labor Department also said unit labor costs jumped by 1.6 percent in the second quarter after soaring by an upwardly revised 6.9 percent in the first quarter.

Unit labor costs were expected to increase by 1.5 percent compared to the 6.6 percent spike that had been reported for the previous quarter.

The sharp increase by labor productivity helped offset a continued surge by hourly compensation, which shot up by 4.0 percent in the second quarter after jumping by 5.0 percent in the first quarter.

Real hourly compensation, which takes changes in consumer prices into account, surged by 2.3 percent in the second quarter after climbing by 1.2 percent in the first quarter.