Add as a preferred source on GoogleU.S. Productivity Rose 3.6% as Unit Labor Costs Fell 0.7%
Hourly compensation increased 2.9% at an annualized rate, while unit labor costs remained 2.4% higher than a year earlier.
U.S. nonfarm business productivity grew faster than hourly compensation in the third quarter, driving unit labor costs lower and offering a measure of labor expense that differs from wages alone.
Productivity rose 3.6%, hourly compensation increased 2.9% and unit labor costs fell 0.7%. The Bureau of Labor Statistics released the preliminary figures Nov. 5. Each quarterly change is a seasonally adjusted annualized rate, expressing the quarter’s pace as if it continued for a year.
Unit labor costs measure hourly compensation divided by productivity. When productivity grows faster than compensation, the labor cost associated with each unit of output can fall even as compensation rises. The compensation measure includes benefits and employer contributions as well as wages.
The quarterly decline does not erase the longer comparison: unit labor costs were 2.4% higher than in the third quarter of 2025. That year-over-year change uses a different measurement window from the annualized quarterly figure.
Separate October labor data showed payrolls increased by 165,000. Average hourly earnings for private nonfarm employees rose 0.4% from September and 3.1% from October 2025. Those earnings figures cover a different period and measure than third-quarter hourly compensation, so their growth rates are not directly comparable.
On Oct. 28, the Federal Open Market Committee held its target interest-rate range at 3.75% to 4.00%. The committee described productivity growth as strong and inflation as elevated at that time; two members favored a quarter-point rate increase.
Lower unit labor costs alone do not establish that consumer inflation has cooled. The preliminary third-quarter estimates are scheduled for revision Dec. 8 at 8:30 a.m. ET (13:30 UTC).