Nonfarm productivity rose at 3.6% rate in third quarter as unit labor costs fell 0.7%, Bureau of Labor Statistics says

Labor productivity in the nonfarm business sector rose at a seasonally adjusted annual rate of 3.6% in the third quarter of 2026, the Bureau of Labor Statistics reported Thursday, Nov. 5, in its preliminary estimate. Output rose 3.7% and hours worked rose 0.1%. Unit labor costs fell at a 0.7% rate, with hourly compensation up 2.9%.¹

The labor share, the portion of output paid to workers as compensation, was 53.0% in the quarter, the bureau said, the lowest since the series started in the first quarter of 1947.¹

Reuters reported that economists had forecast productivity growth of 2.8% and a 0.6% rise in unit labor costs. It said the drop in unit labor costs was the first since the second quarter of 2025.²

Nonfarm business, third quarter

The first figure in each line is the quarterly change at a seasonally adjusted annual rate. The second is the change from the third quarter of 2025.¹

• Labor productivity: up 3.6%; up 2.1%.
• Output: up 3.7%; up 2.3%.
• Hours worked: up 0.1%; up 0.2%.
• Hourly compensation: up 2.9%; up 4.5%.
• Real hourly compensation, adjusted for consumer prices: up 1.1%; up 1.0%.
• Unit labor costs: down 0.7%; up 2.4%.

Since the fourth quarter of 2019, sector productivity has grown at an annualized 2.2%, with output up at a 2.7% rate and hours up at a 0.4% rate, the bureau said. The rate was 1.5% in the prior business cycle, between the fourth quarters of 2007 and 2019. The rate since the first quarter of 1947 is also 2.2%.¹

Revisions

The release incorporates revised national accounts data the Bureau of Economic Analysis published Sept. 30.¹

• Second-quarter nonfarm productivity: 2.1%, from 1.4%.
• Second-quarter output: 2.4%, from 1.7%.
• Second-quarter hours worked: 0.3%, unrevised.
• Second-quarter hourly compensation: 4.0%, from 2.6%.
• Second-quarter unit labor costs: 1.9%, from 1.2%.

Annual productivity growth was revised to 2.3% for 2025 and 3.2% for 2024, each up 0.2 percentage point, and to 2.0% for 2023, down 0.1 percentage point. A revised third-quarter report is scheduled for Tuesday, Dec. 8.¹

Other sectors

Manufacturing productivity rose at a 0.3% rate in the third quarter, with output up 1.3% and hours worked up 1.0%. It rose 2.2% in durable goods manufacturing, where output rose 3.8% and hours rose 1.6%, and fell 1.7% in nondurable goods manufacturing, where output fell 1.6% and hours rose 0.1%.¹

Manufacturing unit labor costs rose at a 2.7% rate, with hourly compensation up 3.0%. From a year earlier, manufacturing productivity rose 0.4%, hourly compensation rose 4.4% and unit labor costs rose 4.0%. Second-quarter manufacturing productivity growth was revised up to 2.9% from 2.4%.¹

In the broader business sector, third-quarter productivity rose at a 4.1% rate, with output up 3.9% and hours worked down 0.2%. Nonfinancial corporate productivity for the second quarter was revised to 3.4% from 2.2%.¹

An economist’s view

Reuters quoted Stephen Stanley, chief U.S. economist at Santander US Capital Markets, as saying, “AI has yet to make a noticeable contribution.” Stanley said workarounds companies adopted in the pandemic left lasting efficiency gains, according to Reuters.²

What the records do not show

• The Nov. 5 release gives no third-quarter figures for nonfinancial corporations and no date for them.¹
• The Sept. 3 release put the second-quarter labor share at 52.8%, then the lowest in the series. The Nov. 5 release gives no revised second-quarter share, so SignalData cannot say how the two readings compare.¹³
• The figures are preliminary. The release does not say by how much they might change.¹
• The figures measure sectors as a whole. The release names no employers, does not mention AI and does not say what caused the change in productivity. The explanation above is one economist’s, as reported by Reuters.¹²