US worker productivity surges in third quarter

WASHINGTON, Nov 5 (Reuters) - US worker productivity grew faster than expected in the third quarter, depressing labor costs and supporting views that ‌the labor market was not a source of inflation.

Nonfarm productivity, ‌which measures hourly output per worker, increased at a 3.6% annualized rate last quarter after advancing ​by an upwardly revised 2.1% pace in the April-June quarter, the Labor Department's Bureau of Labor Statistics said on Thursday. Economists polled by Reuters had forecast productivity increasing at a 2.8% rate after a previously reported 1.4% growth pace ‌in the second quarter.

Productivity ⁠is volatile on a quarter-on-quarter basis. It grew at a 2.1% rate from a year ago. Economists and policymakers are ⁠hoping that an artificial intelligence spending blitz will translate into significant productivity gains.

Unit labor costs — the price of labor per single unit of output — fell at ​a 0.7% ​rate last quarter. That was the ​first decline since the second ‌quarter of 2025 and followed an upwardly revised 1.9% growth pace in the second quarter.

Economists had forecast labor costs rising at a 0.6% pace after growing at a previously reported 1.2% rate. Labor costs grew at a 2.4% rate from a year ago.

They followed on the heels of data last week ‌showing a moderate increase in the Employment ​Cost Index, the broadest measure of labor ​costs, in the third quarter.

Policymakers ​and economists have argued that the jobs market was not ‌a source of inflation. Benign wage ​inflation gives the ​Federal Reserve more latitude to focus on rising price pressures stemming from the ongoing US-Israeli war with Iran.

The US central bank last week ​left its benchmark overnight ‌interest rate in the 3.75%-4.00% range while acknowledging that inflation "remains elevated." ​Economists expect the Fed to raise borrowing costs in December.

(Reporting by ​Lucia Mutikani; Editing by Andrea Ricci)