US productivity climbs 3.5% annualized in Q3 2026, best since 2025

The latest read on US worker efficiency landed with a jolt: nonfarm labor productivity climbed at a 3.5% annualized rate in Q3 2026, according to Kobeissi Letter. That is the largest increase since Q3 2025 and the third consecutive quarter of improvement. The outlet flagged the data as breaking news on X.

Output did much of the heavy lifting. Nonfarm business output, stripped of government spending, surged at a 3.7% annualized pace, the strongest since Q3 2025, per Kobeissi Letter. Hourly compensation also rose, but at a slower 2.9% annualized rate.

Because productivity outran pay growth, unit labor costs, which measure labor expense per unit of output, dropped 0.7% last quarter. That is the first quarterly decline since Q2 2025, according to the outlet. In plain terms, businesses got more done per hour while keeping cost pressure in check.

Kobeissi Letter largely ties the surge to companies pouring money into AI, software and equipment. The goal: sharper efficiency, bigger output and tighter control of labor expenses. The outlet's takeaway is blunt: AI is helping drive a major US productivity surge.