US Labour Productivity Jumps 3.6% in Q3 2026 as Costs Dip
US nonfarm business sector productivity jumped 3.6% in Q3 2026, while unit labour costs fell 0.7%, according to new BLS data.
The United States has seen a significant surge in efficiency within its nonfarm business sector. According to preliminary data released by the US Bureau of Labor Statistics (BLS) on Thursday, US labour productivity climbed by 3.6 per cent during the third quarter of 2026. In a positive turn for businesses, unit labour costs actually declined by 0.7 per cent during the same period.
Driving the Growth: Output vs. Hours
The spike in productivity was primarily fueled by a robust increase in output, which grew by 3.7 per cent. Interestingly, this growth happened without a significant increase in manpower; hours worked rose by a mere 0.1 per cent during the July-September quarter.
When looking at the broader picture, the BLS noted that productivity increased by 2.1 per cent compared to the third quarter of the previous year. These figures are based on seasonally adjusted annualised rates.
The Balance of Compensation and Cost
While productivity soared, workers also saw gains. Hourly compensation increased by 2.9 per cent. However, because productivity grew faster (3.6 per cent) than compensation, the overall unit labour costs—calculated as the ratio of hourly compensation to productivity—dropped.
Despite the quarterly dip, unit labour costs remain 2.4 per cent higher than they were in the same quarter a year ago. Additionally, real hourly compensation, which accounts for consumer price changes, rose by 1.1 per cent in the third quarter and has seen a total increase of 1.0 per cent over the last four quarters.
A Historic Shift in Economic Share
One of the most striking revelations in the report is the declining share of labour in economic output. In the third quarter, labour's share fell to 53.0 per cent. This marks the lowest level recorded since the data series first began in the first quarter of 1947.
Sector-Specific Performance
The productivity gains were not uniform across all industries. The manufacturing sector saw a modest increase of 0.3 per cent, driven by a 1.3 per cent rise in output and a 1.0 per cent increase in hours worked.
- Durable Goods Manufacturing: Productivity increased by 2.2 per cent.
- Nondurable Manufacturing: Productivity suffered a decline of 1.7 per cent.
In the manufacturing sector, unit labour costs rose by 2.7 per cent during the quarter and are now 4.0 per cent higher than they were a year ago.
Wider Labour Market Trends
The BLS also revised its second-quarter nonfarm business productivity growth upward to 2.1 per cent from an initial 1.4 per cent, citing stronger output growth.
This productivity data follows a separate report from November 3 (the Job Openings and Labor Turnover Survey or JOLTS), which indicated a tightening yet steady labour market. Job openings rose to 7.52 million in September 2026, up from 7.19 million in August—an increase of 333,000. The job openings rate moved from 4.3 per cent to 4.5 per cent.
Other key labour market indicators include:
- Hires: Remained stable at approximately 5.4 million.
- Total Separations: Held steady at 5.3 million.
- Voluntary Quits: Increased to 3.4 million.
- Layoffs and Discharges: Remained largely unchanged at 1.6 million.
The current business cycle, which started in the fourth quarter of 2019, has seen nonfarm business productivity grow at an annualised rate of 2.2 per cent, outperforming the previous cycle (2007-2019), which grew at 1.5 per cent.