US Second Quarter Productivity Holds at 1.4 Percent as Labor Share Hits a Record Low
Nonfarm business labor productivity in the United States grew at an annualized 1.4 percent in the second quarter of 2026, unrevised from the preliminary estimate, while unit labor costs were revised down to 1.2 percent from 1.3 percent, the Bureau of Labor Statistics said in its revised Productivity and Costs report, released September 3, 2026.
A Manufacturing Revision Upward
Manufacturing told a different story from the broader economy. Productivity in the sector was revised up to 2.4 percent annualized from a preliminary 1.9 percent, a revision of 0.5 percentage points, on our calculation, as output was revised up 0.8 point to 5.4 percent, the largest increase in the manufacturing output measure since the second quarter of 2021, when it rose 6.7 percent. Manufacturing unit labor costs were revised to a 0.3 percent decline from an initially reported flat reading, marking the first decline in that measure since the second quarter of 2021, when it also fell 0.3 percent, an exact repeat of that quarter’s figure on our reading of the two releases side by side.
The Lowest Labor Share on Record
Labor’s share of nonfarm business output fell to 52.8 percent in the second quarter, the lowest level in a series that began in 1947, the bureau said. Nominal hourly compensation rose 2.6 percent annualized, but after adjusting for inflation, real hourly compensation fell 3.3 percent, a gap of 5.9 percentage points between the nominal and real measures on our calculation. In the nonfinancial corporate sector, where this report carries preliminary rather than revised figures, unit profits rose 43.0 percent annualized, the fastest pace since the second quarter of 2021, even as unit labor costs in that sector fell 0.3 percent, a gap of 43.3 percentage points between the growth in profits and the change in labor costs for the quarter, on our calculation.
| Measure | Preliminary | Revised |
|---|---|---|
| Nonfarm productivity | 1.4% | 1.4% |
| Nonfarm unit labor costs | 1.3% | 1.2% |
| Manufacturing productivity | 1.9% | 2.4% |
| Manufacturing unit labor costs | 0.0% | -0.3% |
Figures are seasonally adjusted, annualized quarterly rates as published in USDL-26-1434.
A Cycle Running at the Historical Average
Over the current business cycle, from the fourth quarter of 2019 through the second quarter of 2026, nonfarm business productivity has grown at an annualized 2.1 percent, matching the long run average of the series since 1947 and running well above the 1.5 percent pace of the prior cycle between the fourth quarters of 2007 and 2019, the report’s own cycle comparison showed.
Why it matters: For the United States, the record low labor share and unusually strong increase in nonfinancial corporate unit profits point to a widening divergence between labor compensation and profits in the second quarter. At the same time, manufacturing’s upward productivity revision shows that the sector’s rebound was stronger than initially estimated.
Outlook: The next release, covering preliminary third quarter 2026 figures, is due November 5, 2026.
Sources: Bureau of Labor Statistics.
