Productivity Rises 3.6%, Unit Labor Costs Fall
U.S. worker output per hour grew at a 3.6% annualized rate in the third quarter, while unit labor costs declined.
Updated on Nov. 5, 2026 in Employment
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U.S. labor productivity increased at a 3.6% annualized rate in the third quarter, and unit labor costs fell 0.7%. Prior-quarter productivity growth was revised upward to 2.1%.
Why it matters
Productivity gains mean businesses can produce more output with the same labor, which can help limit price increases for consumers across the United States. Labor's share of income fell to its lowest level since 1947, a shift economists are watching closely.
Non-farm business output rose an annualized 3.7% and hours worked rose just 0.1% in the third quarter, the gap driving the productivity figure. Hourly compensation grew 2.9% annualized, or 1.1% after inflation, against a labor share of income of 53%, the lowest since 1947 in the available data.
The players
Bureau of Labor Statistics
The federal agency that compiles and publishes the U.S. productivity and labor cost data used to measure output per hour worked.
Federal Reserve Chairman Kevin Warsh
The head of the Federal Reserve, who has said technological advances should ultimately ease price pressures in the economy.
Challenger, Gray & Christmas
An outplacement firm that tracks corporate layoff announcements and reported October layoffs were the lowest for any October in three years.
The details
Productivity is measured as non-farm business output per hour worked, and output grew far faster than hours in the quarter. Companies have invested heavily in artificial intelligence, software and equipment to generate more output with the same labor, and initial unemployment claims fell to their lowest level since 1969 last week.
Timeline
Q2 2025: Unit labor costs had previously declined last quarter.
Q3 2026: Productivity rose 3.6% and unit labor costs fell 0.7%.
November 5, 2026: The Bureau of Labor Statistics released the productivity report showing third-quarter gains.
Market Landscape
Labor's share of income reached 53% in the third quarter, the lowest level in data back to 1947, extending a long decline in the portion of national income going to workers. The productivity gains reported this quarter continue a pattern in which firms substitute technology and equipment for labor, a trend economists expect to persist this year.
Productivity growth that keeps price increases in check can help stabilize household budgets even as wages grow only modestly after inflation. Workers see slower real pay growth of 1.1% this quarter, so households may feel the squeeze even as the broader economy becomes more efficient.
The takeaway
Productivity gains can ease price pressure over time, but a shrinking labor share means workers are capturing less of the economy's growth. Watch future quarterly releases to see whether real wages begin to catch up.
Further reading
Explore more on Employment trends shaping the U.S. labor market.
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