US Worker Productivity Hits Two-Year High Amid AI Boom
Oliver ScottUS productivity surged 4.9% in Q3, driven by AI, fueling a "jobless expansion" with declining labor costs.
Q3 Productivity Growth Confirmed at 4.9%
U.S. worker productivity expanded at its fastest pace in two years during the third quarter, a trend likely driven by a significant increase in artificial intelligence spending.
The Bureau of Labor Statistics confirmed on Thursday that nonfarm productivity, which measures hourly output per worker, grew at an unrevised 4.9% annualized rate. This marks the strongest performance since the third quarter of 2023 and matched the expectations of economists polled by Reuters. The growth rate for the second quarter also remained unrevised at a 4.1% pace.
From a year-over-year perspective, productivity increased at an unrevised rate of 1.9%.
The release of this report was delayed due to a 43-day federal government shutdown. Another potential shutdown looms, which could impact future data releases from the Bureau of Labor Statistics. Congress faces a January 30 deadline to fund the government, with Senate Democrats expressing opposition to funding legislation that includes money for the Homeland Security Department, which oversees the federal immigration agency ICE.
The Link Between Productivity and a "Jobless Expansion"
This robust productivity growth provides insight into what economists are labeling a "jobless economic expansion." While the broader economy grew at a strong 4.4% rate in the third quarter, job creation has slowed considerably. Only 584,000 jobs were added in 2025, a steep drop from the 2.0 million jobs created in 2024.
Analysts suggest two key factors are at play:
• Policy Impact: The Trump administration's trade and immigration policies are seen as having reduced both the demand for and the supply of workers.
• AI Investment: As businesses pour capital into artificial intelligence, they are facing uncertainty about future staffing needs, which has led to more cautious hiring.
Unit Labor Costs Continue to Decline
Supporting the productivity data, unit labor costs—the price of labor for each unit of output—decreased at an unrevised 1.9% rate in the third quarter. This follows a 2.9% rate of decline in the second quarter.
However, on a year-over-year basis, labor costs saw a slight upward revision. They increased at a 1.3% rate, up from the previously reported 1.2% growth.
