US Productivity Rises 1.4%

U.S. nonfarm labor productivity rose at a 1.4% annualized rate in Q2, above a revised 0.8% in Q1 and beating consensus. Unit labor costs rose 1.3%, below expectations. Fed officials, investors and economists are monitoring whether large-scale AI investment is lifting productivity, but official quarterly data are volatile and a clear trend will take time to emerge. Labor costs remain a major corporate expense; efficiency gains can allow wage increases without adding inflationary pressure. Some economists warn sustained AI-driven productivity gains could prompt firms to delay hiring or cut staff. Q2 productivity was supported by the strongest output growth since Q3 2025 while hours worked rose only modestly.