U.S. productivity rises 3.6% in Q3 as hours worked barely move
- U.S. nonfarm productivity rose 3.6% in Q3 2026, annualized.
- Output rose 3.7% while hours worked rose 0.1%.
- Unit labor costs fell 0.7% in the quarter.
- The labor share fell to 53.0%, the lowest since records began in 1947.
WASHINGTON, UNITED STATES — U.S. nonfarm business productivity rose at a 3.6% annual rate in the third quarter of 2026, as output grew 3.7% and hours worked rose just 0.1%. From a year earlier, productivity was up 2.1%.
Unit labor costs fell 0.7%, as hourly compensation rose 2.9% and productivity outpaced it. Over the past four quarters, unit labor costs rose 2.4%.
The BLS calculates unit labor costs as the ratio of hourly compensation to labor productivity, so faster productivity growth tends to pull them down.
Workers’ share hits a record low
The labor share, the portion of output that goes to workers as compensation, fell to 53.0% in the quarter, the lowest level in a series that begins in 1947, the U.S. Bureau of Labor Statistics (BLS) said in its preliminary release on Nov. 5.
Real hourly compensation, which accounts for consumer prices, rose 1.1% in the quarter and 1.0% over the past four quarters.
The figures reflect the 2026 annual update of the national accounts, released by the Bureau of Economic Analysis on Sept. 30.
A strong cycle so far
Labor productivity, or output per hour, is calculated by dividing an index of real output by an index of hours worked by all workers, including employees, proprietors and unpaid family workers.
Since the fourth quarter of 2019, productivity has grown at a 2.2% annual rate, with output up 2.7% and hours worked up 0.4%. That beats the 1.5% rate of the previous business cycle, from 2007 to 2019, and matches the long-term rate of 2.2% since 1947.
Factories lag
Manufacturing productivity rose only 0.3%, as output grew 1.3% and hours worked rose 1.0%. Durable goods manufacturers lifted productivity 2.2%, while nondurable producers saw it fall 1.7% as their output declined.
Manufacturing unit labor costs rose 2.7% in the quarter and 4.0% from a year earlier. The BLS notes that its manufacturing output series is not directly comparable with the nonfarm business measure.
The agency also revised second-quarter nonfarm productivity up 0.7 percentage point, to a 2.1% gain.
What it means for employers
Companies produced more in the third quarter with almost no extra hours, and paid workers a shrinking share of what they made. For employers, the data supports doing more with existing teams rather than adding headcount.
Companies weighing workforce planning or productivity outsourcing can review the options in OA’s ultimate guide to outsourcing.
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