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Labor Market · November 5, 2026 · 2 min read

Q3 productivity rises 3.6% annualized; unit labor costs still higher over the year

By Econ Data Tools Editorial Team

Published November 5, 2026 • Updated November 5, 2026

The preliminary BLS release separates annualized quarterly growth from twelve-month changes and includes revisions. Manufacturing productivity grew more slowly.

BLS reported on November 5 that nonfarm business labor productivity increased at a 3.6% annualized rate in the third quarter of 2026. Output rose 3.7% and hours worked rose 0.1%. These are seasonally adjusted annualized quarterly rates, not the change over the preceding twelve months. Compared with the same quarter a year earlier, nonfarm business productivity increased 2.1%. Productivity measures output per hour. The annual comparison and the annualized quarterly rate describe different periods and should not be used interchangeably. Unit labor costs fell at a 0.7% annualized rate during the quarter as hourly compensation rose 2.9%, more slowly than productivity. Unit labor costs still increased 2.4% over the last four quarters. A quarterly decline therefore does not mean that the annual measure also fell. Real hourly compensation, adjusted for consumer prices, increased at a 1.1% annualized rate in the third quarter and rose 1.0% over the last four quarters. BLS put labor share at 53.0%, the lowest reading in a series beginning in the first quarter of 1947. That share measures the portion of output accruing to workers as compensation. The manufacturing results differed from the broader nonfarm business measure. Manufacturing productivity rose at a 0.3% annualized rate, with output up 1.0% and hours up 0.7%. Durable manufacturing productivity rose 2.2%, while nondurable manufacturing productivity fell 1.7%. The figures are preliminary and include historical revisions. BLS revised second-quarter nonfarm business productivity growth upward to 2.1%. This release does not prove that a particular technology caused the gain, nor does it establish a Federal Reserve decision or guarantee a future inflation rate.

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