Nonfarm business productivity grew 1.4 percent in the second quarter of 2026 while unit labor costs rose 1.3 percent, the Bureau of Labor Statistics reported Aug. 6.
In manufacturing, the picture was more favorable: productivity rose 1.9 percent while unit labor costs were essentially unchanged, a combination that helps contain inflation in the goods sector, the BLS said.
Productivity growth — output per hour worked — is a key long-run driver of wage growth without inflation. Sustained improvements benefit the Federal Reserve’s inflation outlook and support arguments for continued monetary policy flexibility.
The data arrive alongside the July employment report showing a decline in nonfarm payrolls, creating a mixed economic picture for the second half of 2026. Rising productivity can partially offset concerns about slowing job creation, as it indicates the economy is generating more output from its existing workforce.
The second-quarter productivity growth is consistent with recent trend improvements tied to technology adoption and workforce restructuring across multiple industries, economists have noted.
Unit labor costs rising at just 1.3 percent suggests that wage growth is not outpacing productivity gains by a wide margin, reducing the risk of a wage-price spiral that would complicate the Fed’s inflation management.
The manufacturing productivity figures are particularly significant for trade-exposed industries, where cost competitiveness directly affects American companies’ ability to compete with foreign producers.