Productivity may signal a rough job market

Labor productivity rose at a 4.9% annualized rate in the third quarter while GDP expanded about 4.3%, even as job gains stayed modest and inflation-adjusted hourly compensation edged down.

Labor productivity in the United States rose sharply in the third quarter, according to government reports and recent coverage. Businesses increased spending on artificial intelligence and reduced hiring, which lifted output per worker. The economy expanded while job gains remained limited. Real hourly compensation was reported to have fallen slightly in the same quarter. Key facts: - The Labor Department and Bureau of Labor Statistics reported labor productivity grew at a 4.9% annualized rate in the third quarter, the fastest pace since 2023. - The economy’s output (GDP) rose at about a 4.3% annualized rate during the same period. - The reporting noted that inflation-adjusted hourly compensation declined roughly 0.2% in the quarter. - Articles describe businesses as increasing investment in AI and pulling back on hiring, raising output with fewer additional workers. - Economists quoted in the coverage characterized recent productivity gains as strong while noting that workers have not clearly shared in those gains. Summary: Rising productivity has helped support recent GDP growth even as job gains and real wages have lagged. The situation reflects higher output per worker amid greater AI investment and restrained hiring, and the longer-term effects on employment and pay are undetermined at this time.