Is manufacturing productivity recovering? Evidence from the past and present

On January 29, 2026, the revised third quarter 2025 labor productivity and costs data were released. Labor productivity is a measure of economic performance that compares the amount of output with the amount of labor used to produce that output. It is calculated as output per hour worked. Labor productivity growth is a sign that the economy is becoming more efficient. This article examines the first, second, and third quarter labor productivity estimates for 2025 and then uses historical data to put the figures in context.

Short-, medium-, and long-term trends in manufacturing productivity

There are two main ways of measuring changes in labor productivity: (1) comparing growth in the current quarter to the last quarter and (2) comparing the current quarter to the same quarter last year. The same-quarter-a-year-ago measure is less volatile and may provide a clearer picture of medium-term and long-term trends in labor productivity.¹ The same-quarter-a-year-ago measure is calculated using the index value from four quarters ago as the start period and the current quarter index value as the end period. 

Using the from-previous-quarter measure, manufacturing productivity increased 3.5 percent from the fourth quarter of 2024 to the first quarter of 2025, before increasing 2.9 percent between the first and second quarters of 2025. Looking at the third quarter of 2025, from the previous quarter, labor productivity in manufacturing showed stronger than usual growth for the third consecutive quarter, growing 3.7 percent. All percent changes are at seasonally adjusted annualized rates. (See chart 1.)

In contrast, from the same quarter last year, manufacturing productivity increased 0.5 percent in the first quarter of 2025 and 1.2 percent in the second quarter. Continuing this trend, from the same quarter last year, productivity saw a third consecutive quarter of strong growth, increasing 2.4 percent in the third quarter.

Now that we have looked at the most recent trends in labor productivity growth, it is important to note that long-term analysis often provides a more accurate picture of productivity trends. So, let’s take a closer look at labor productivity growth in two longer periods, starting with the first quarter of 2007 through the third quarter of 2025.

As shown in chart 2, using the same-quarter-a-year-ago measure, from the second quarter of 2011 to the second quarter of 2020, manufacturing had lackluster growth. Excluding the pandemic, the 2.4-percent increase from the third quarter of 2024 to the third quarter of 2025 was the highest growth in same-quarter-a-year-ago manufacturing productivity since the first quarter of 2011 (3.1 percent). This 2.4-percent increase is part of a recent upward trend that started in 2023. (See chart 2.)

To examine if these trends are present in an even longer period, chart 3 shows manufacturing productivity growth over the business cycles since the series began in 1987. The business cycle starting in the fourth quarter of 2007 and ending in the fourth quarter of 2019 showed almost no productivity growth, at 0.1 percent. For the current business cycle, starting in the fourth quarter of 2019 through the fourth quarter of 2024, productivity was stagnant, at 0.0 percent. When 2025 data are included in the current business cycle, labor productivity has grown 0.4 percent to date. Yet, this is still well below the long-term rate of 2.1 percent from the first quarter of 1987 to the third quarter of 2025.

To better understand these long-term trends, it is helpful to take a closer look at the components of labor productivity: output and hours worked.

Trends in output and hours worked, 2007–25

Labor productivity growth is the ratio of output to hours worked. When output grows at a faster rate than hours worked grows, this results in productivity growth. Chart 4 shows this relationship in manufacturing since 2007. Labor productivity had been slowly declining since 2011 but saw a small rebound in growth starting in 2023. Specifically, there has been a divergence between output growth and hours-worked growth, the latter of which has been declining.

Chart 5 shows that recent growth in both output and hours worked was small or negative in 2023 and 2024, leading to inconsistent growth in productivity. By contrast, productivity experienced consistent growth in the first three quarters of 2025, as a result of small or negative growth in hours worked and high growth in output.

Conclusion

Labor productivity in manufacturing indicates the efficiency of the economy by comparing growth in output to growth in hours worked. Sources of labor productivity can include the impact of labor composition, use of capital, technological change, efficiency improvements, returns to scale, reallocation of resources, and other factors on economic growth. Our annual measures of total factor productivity help provide additional detail on the drivers of productivity growth.²

To see more details and data related to labor productivity, manufacturing and other industries productivity, and total factor productivity, check out the productivity page and the productivity tables page. Preliminary labor productivity data for the fourth quarter of 2025 is scheduled to be released on March 5th, 2026 (revised on March 24th, 2026) and total factor productivity for major industries, 2025 will be released this fall.