U.S. Productivity Jumped in Q3 2026

Summary

• U.S. nonfarm business productivity jumped 3.6% q/q saar in Q3 2026, exceeding the 2.7% forecast & following an upwardly revised 2.1% gain in Q2.
• Nonfarm business output increased 3.7% q/q saar in Q3, while real GDP grew 3.4% q/q.
• Hours worked edged up 0.1% q/q in Q3 after a 0.3% increase in Q2.
• Compensation growth slowed to 2.9% q/q in Q3 from an upwardly revised 4.0% in Q2, with year-over-year growth at 4.5% down from 4.9%.
• Unit labor costs declined 0.7% q/q in Q3 as productivity growth exceeded compensation growth, contrasting with a 1.1% increase forecast by Action Economics.
• Manufacturing productivity growth slowed markedly to 0.3% q/q saar in Q3 from a revised 2.9% gain in Q2.
• Factory output rose 1.3% q/q in Q3 after a 5.8% jump in Q2, while manufacturing hours worked increased 1.0% q/q.
• Manufacturing unit labor costs jumped 2.7% q/q in Q3 to a 4.0% year-over-year rate, the highest since Q4 2024.
• Benchmark revisions back to the beginning of 2021 were modest but generally positive, raising productivity growth from Q4 2020 to 1.62% annually from 1.50%.
• Productivity growth has averaged 2.7% annually since early 2023, a rate likely reflecting AI & other technology advances.