"By the numbers: Labor productivity rose at a stunning 4.9% annual rate in the third quarter, the government said Thursday morning, as output rose at a 5.4% rate and hours worked increased only 0.5%. In effect, even as hiring slowed way down, companies were still able to produce more goods and services. It continues a remarkable run. Over the last two years, labor productivity has risen at a 2.3% annual rate, far better than the 1.1% average in the 2010s."
"Between the lines: AI advances might be part of the story. So could a business investment boost fueled by the Trump administration's tax and deregulatory policies. But the timing doesn't completely line up. The productivity surge started in the spring of 2023, when ChatGPT still looked more like a novelty than a business tool and when the 2024 presidential election was far off."
Labor productivity rose 4.9% annualized in Q3 as output increased 5.4% while hours worked grew only 0.5%. Productivity has advanced at a 2.3% annual rate over the last two years, outpacing the 1.1% average of the 2010s. The surge is lifting headline GDP growth and should raise incomes over time, even as hiring slows and labor demand softens in the near term. Potential drivers include AI and automation, business investment tied to tax and deregulatory policies, pandemic-era labor-saving practices, and a "tenure dividend" from a more experienced, less-churning workforce.
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