BUSINESS COSTS & OPERATING PERFORMANCE · SEPTEMBER 7, 2026
Revised Data Show Productivity Growth Outpacing Unit Labor Costs in Q2
BLS reported September 3 that second-quarter nonfarm business productivity rose at a 1.4% annualized rate while unit labor costs increased 1.2%; manufacturing productivity rose 2.4% as unit labor costs declined 0.3%.
What the September 3 revision shows
The Bureau of Labor Statistics reported that nonfarm business labor productivity increased at a seasonally adjusted 1.4% annual rate in the second quarter as output rose 1.7% and hours worked increased 0.3%. From a year earlier, productivity was 2.2% higher. BLS defines labor productivity as real output divided by hours worked, including hours of employees, proprietors, and unpaid family workers.
- 01Output rose 1.7%
- 02Unit labor costs rose 1.2%
- 03Manufacturing productivity rose 2.4%
Labor-cost and manufacturing detail
Nonfarm business unit labor costs increased at a 1.2% annual rate during the quarter, reflecting a 2.6% increase in hourly compensation and the 1.4% productivity gain. The unit-labor-cost estimate was revised down slightly from 1.3%. Manufacturing productivity was revised up to 2.4%, with output increasing 5.4% and hours increasing 2.9%; manufacturing unit labor costs declined 0.3% for the quarter but were 3.4% higher than a year earlier. These sector averages do not measure an individual company's wage pressure or efficiency.
Practical borrower takeaway
Build projections from operational drivers the lender can verify: units produced or services delivered, billable hours, headcount, wage rates, overtime, benefits, scheduling, utilization, rework, and pricing. Explain how planned equipment, software, or process changes affect capacity and margins, and include the ramp-up cost before assuming full productivity benefits. Stress-test debt service under slower output growth or higher compensation so the loan request is not dependent on a national average that may not match the business.
Borrowers should support margin and hiring forecasts with their own output-per-labor-hour, compensation, overtime, staffing, and pricing data instead of applying national productivity averages directly to the business.
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