Workers Are Doing More, But Not Getting Paid For It

Core Insights - Labor productivity surged at an annualized rate of 4.9% in the third quarter, the fastest pace since 2023, while hourly compensation decreased by 0.2% after adjusting for inflation, resulting in reduced buying power for workers [1][7]. Economic Implications - Economists view the increase in productivity as beneficial for the long-term economic outlook, suggesting that higher productivity can lead to improved living standards and wage growth without triggering inflation [2][4]. - Increased productivity allows firms to enhance profitability, which can enable them to absorb higher costs, reinvest, or lower prices, potentially alleviating inflation concerns [3][4]. Technology and Productivity - The rise in productivity indicates that companies' goals of leveraging artificial intelligence to achieve more output with fewer workers may be within reach, although the full impact has yet to be realized [5][7]. - Experts caution that while productivity growth is promising, it remains uncertain how much it will benefit workers, with concerns about a "jobless expansion" where economic growth does not translate into improved labor market conditions [6][7].