US labor productivity accelerated in the third quarter at the fastest pace in a year, suggesting a capital spending boom is translating into greater efficiency. Productivity, or nonfarm business output per hour, increased at a 3.6% annualized rate after an upwardly revised 2.1% pace in the prior quarter, data from the Bureau of Labor Statistics showed Thursday. Unit labor costs fell 0.7%, the first decline since the second quarter of 2025, easing pressure on businesses as labor costs remain their biggest expense.
Companies have poured massive amounts of money into artificial intelligence, software and equipment, anticipating greater output with the same labor. US economic growth accelerated amid vibrant business investment and resilient consumer spending. Economists expect efficiency gains to continue this year amid the AI rush.
The productivity report showed third-quarter nonfarm business output increased 3.7% annually, the fastest pace in a year, with hours worked rising 0.1% and hourly compensation increasing 2.9%. After adjusting for inflation, worker compensation rose 1.1%. The labor share of income fell to 53%, the lowest level since 1947.
Initial applications for unemployment benefits declined to the lowest level since 1969, highlighting a stable job market. Layoff announcements were the lowest for any October in three years.
Source: Bloomberg Markets · Summarized by HeadlinesBriefing