US Productivity Jumps as Labor Costs Fall

Nonfarm business productivity rose 3.6% annualized in the third quarter, the fastest pace since 2025, as output climbed 3.7% while hours worked barely budged. Hourly compensation grew just 2.9%, trailing output gains, which pushed unit labor costs down 0.7% — the first quarterly drop since mid-2025. The Bureau of Labor Statistics tied part of the jump to heavier corporate spending on AI and automation. Cooling labor costs remove one inflation input the Fed tracks closely, a backdrop that favors bonds like $TLT heading into the next rate decision.