American workers’ productivity surged in the third quarter to its strongest pace in two years, in a sign that strong economic growth didn’t stoke inflation in the second half of 2025.
US labor productivity, measured as nonfarm employee output per hour, rose at an annualized rate of 4.9% in the July-through-September period, the Labor Department reported Thursday, picking up from the prior quarter’s 4.1% rate. That was the fastest pace since the 5.2% rate in the third quarter of 2023.
In the third quarter, both productivity and economic growth were robust. The US economy expanded at a 4.3% annualized rate in July through September, which, like productivity, was also the fastest pace in two years. Resilient consumer spending and higher net exports boosted third-quarter GDP.
Last year’s strong productivity “reflects the payoff from a multi-year effort to streamline talent needs, automate processes, and operationalize efficiency,” Gregory Daco, chief economist at EY-Parthenon, wrote in analyst note.
He added that productivity growth was “not primarily driven by AI – yet.”
“The objective has been strategic resilience in an increasingly volatile geoeconomic environment, and structural robustness amid continuous supply shocks from trade and industrial policy, immigration shifts, demographic constraints, geopolitical disruptions, and an AI-driven technological transition,” Daco said.
