Economy

U.S. worker productivity surges in third quarter as labor costs fall

Washington, D.C. • November 5, 2026 • By Press Pass USA

Editorial illustration: a modern American factory floor, a worker in a hard hat and a manager reviewing charts on a tablet, with an upward-trending line graph on a large wall screen

Editorial illustration — Press Pass USA

American workers produced more per hour in the third quarter, and it cost businesses less to do it. Productivity in the nonfarm business sector rose at a 3.6% annualized rate from July through September, the Bureau of Labor Statistics reported Thursday — well above the 2.8% economists had forecast.

The gain came with output up 3.7% while total hours worked rose just 0.1%, meaning nearly all of the growth in production came from workers getting more done per hour, not from working longer. Compared with the same quarter a year ago, productivity was up 2.1%.

The report also revised the second quarter upward. Productivity in the April-June period now stands at a 2.1% pace, up from the 1.4% originally reported, making the third quarter the second straight quarter of accelerating gains.

Unit labor costs — what businesses pay in labor to produce one unit of output — fell at a 0.7% rate in the third quarter, the first decline since the second quarter of 2025. Economists had expected costs to rise 0.6%. The drop followed an upwardly revised 1.9% increase in the second quarter. Hourly compensation rose 2.9% in the quarter, but productivity grew faster, pulling costs per unit down. From a year ago, unit labor costs were still up 2.4%.

In manufacturing, the picture was softer: productivity rose just 0.3% in the quarter, while unit labor costs in the sector climbed 2.7%, according to the Bureau of Labor Statistics.

The numbers support the view that the labor market is not a source of inflation, a point policymakers and economists have made as they watch prices. Benign wage inflation gives the Federal Reserve more latitude to focus on rising price pressures tied to the ongoing U.S.-Israeli war with Iran. The central bank last week left its benchmark overnight interest rate in the 3.75%–4.00% range while acknowledging that inflation "remains elevated." Economists expect the Fed to raise borrowing costs in December.

Economists and policymakers are also watching whether a surge in artificial intelligence spending will translate into lasting productivity gains. The data is volatile quarter to quarter and subject to large revisions — the Bureau of Labor Statistics is scheduled to publish a revised third-quarter estimate on December 8 — but the direction of the last two quarters points to a workforce doing more with the same hours.

Attention now turns to Friday, when the Labor Department releases the October jobs report. Markets expect payrolls to have grown by about 65,000 last month, up from 29,000 in September, with unemployment holding at 4.2%.

Sources: Reuters, "US worker productivity surges in third quarter" (Nov. 5, 2026, full text verified); U.S. Bureau of Labor Statistics, Labor Productivity and Costs, latest numbers (Nov. 5, 2026, verified). Event date verified: BLS preliminary third-quarter report released Nov. 5, 2026; revised estimate scheduled Dec. 8, 2026; October jobs report due Nov. 6, 2026.