How California Shaped U.S. Productivity Growth in 2025
California led nearly one-third of U.S. productivity growth in 2025, with labor productivity increasing by 4.2%.
According to the U.S. Bureau of Labor Statistics, California was the driving force behind U.S. productivity growth in 2025.
In its report, “Productivity by State – 2025,” the agency said California’s private nonfarm worker productivity increased by 4.2 percent last year, trailing only the District of Columbia (5.2 percent) and Arizona (4.4 percent).
Still, California’s productivity had the greatest impact on the nation.
Why California had the biggest impact on U.S. productivity
California’s economy is so large that its benefits have a huge impact on the entire country.
“California accounted for approximately 14% of national output and had the largest impact on national productivity growth,” the report states. “The state’s 4.2% increase in labor productivity in 2025 contributed to nearly a third of the national increase of 1.8%.”
Additionally, California worker productivity appears to be unaffected by large companies that have exited the state in recent years, including Charles Schwab, Chevron, Oracle, SpaceX, and Tesla.
What is California’s workforce like?
According to the California Employment Development Department, the state had a total of about 18 million non-agricultural workers at the end of 2025, of which about 16 million worked in service industries such as retail, health care, transportation, food services, leisure and hospitality. A little over 2 million workers were involved in construction or manufacturing.
California workers produced more in fewer hours
Productivity statistics are based on each state’s share of current gross domestic product (in dollars), not hours worked.
Apparently, California workers are working smarter, not harder, because their hours have decreased over the past few years. According to the department, state residents worked fewer hours in 2025 than in any year since the pandemic (27.884 billion total hours).
The report, released on May 28, also includes “long-term trends” showing data from 2007 to 2025 and 2019 to 2025. California ranked third in Labor Productivity by State, Annual Rate of Change, 2007-2025, behind Washington and North Dakota.
But thanks to its population, California once again had the greatest influence on “contribution to national labor productivity,” doubling the contribution of either Texas or New York, the next most productive states on the list.
How does government measure productivity?
The bureau’s Office of Productivity and Technology measures productivity in six major sectors of the U.S. economy: business, nonfarm business, nonfinancial corporate business, general manufacturing, durable goods manufacturing, and nondurable goods manufacturing.
By comparing productivity statistics to hours worked, we can determine how efficiently each state and sector converts labor into goods and services.
