Recent Surge in US Productivity

The US has seen a significant surge in productivity among its workers, with the third quarter of 2025 experiencing the strongest pace in two years. This increase in productivity has been a welcome sign for the economy, indicating that strong economic growth has not led to higher inflation.

What is Labor Productivity?

US labor productivity is measured as nonfarm employee output per hour. It rose at an annualized rate of 4.9% in the July-through-September period, according to the Labor Department. This is a significant increase from the prior quarter’s 4.1% rate and is the fastest pace since the 5.2% rate in the third quarter of 2023.

Economic Growth and Productivity

The third quarter saw both productivity and economic growth experience robust gains. The US economy expanded at a 4.3% annualized rate in July through September, which is also the fastest pace in two years. The drivers behind this economic growth include resilient consumer spending and higher net exports, which have contributed to the country’s GDP.

The Impact of Streamlining and Automation

Last year’s strong productivity is attributed to the payoff from a multi-year effort to streamline talent needs, automate processes, and operationalize efficiency, according to Gregory Daco, chief economist at EY-Parthenon. This strategic approach has enabled businesses to achieve greater resilience in an increasingly volatile geoeconomic environment.

The Role of AI in Productivity Growth

Daco notes that productivity growth was "not primarily driven by AI – yet." While AI is expected to play a significant role in future productivity growth, the current increase is largely due to the efforts of businesses to improve their operational efficiency and adapt to changing market conditions.

Conclusion

The recent surge in US productivity is a positive sign for the economy, indicating that strong economic growth can be achieved without stoking inflation. As businesses continue to adapt to the evolving geoeconomic environment and invest in new technologies, including AI, we can expect to see further gains in productivity. This, in turn, will help drive economic growth and ensure the US remains competitive in the global market.