U.S. Business Productivity Jumps 3.6% in Q3 as Tech Stocks Slide

Key Facts

U.S. nonfarm business labor productivity rose at a seasonally adjusted annual rate of 3.6% in the third quarter of 2026, according to data released Thursday, November 5, by the Bureau of Labor Statistics. The reading was above the 2.8% annual growth forecast by economists surveyed by Reuters. But the strong data did not quell the selloff that swept Wall Street in the same session, when stocks tied to building artificial intelligence data centers led pressure on the technology sector. The semiconductor index fell as much as 11%, while the Nasdaq Composite dropped as much as 5% during trading, Reuters reported. Investors’ concerns centered on the difficulty of financing the expansion of AI infrastructure and the possibility of restrictions on data center construction.

Productivity growth came as nonfarm business output increased 3.7%, while hours worked rose just 0.1%, according to the Bureau of Labor Statistics. The gap reflects output expanding much faster than the time employees spent working during the quarter. Year over year, productivity rose 2.1% compared with the third quarter of 2025. The reading also improved after second-quarter growth was revised to a 2.1% annual rate, from the previous estimate of 1.4%. Comparing the two quarters puts the new reading in the context of accelerating productivity, while the year-over-year comparison remains a different measure from the annual rate used to calculate quarterly change.

Nonfarm business unit labor costs fell at a 0.7% annual rate in the third quarter, according to the Bureau of Labor Statistics. The decline came as hourly compensation increased 2.9% and productivity rose 3.6%, according to the bureau’s breakdown of cost components. Over the four quarters ending in the third quarter, unit labor costs rose 2.4%, placing the quarterly decline alongside continued growth over a longer period. Meanwhile, labor’s share of output was 53.0% in the third quarter. The bureau said this measure, which tracks the share of output paid to workers as compensation, was the lowest in its series, which begins in the first quarter of 1947.

Bureau data show productivity growth in the current business cycle, which began in the fourth quarter of 2019, was 2.2% at an annual rate through the third quarter of 2026. That compares with a rate of 1.5% in the previous business cycle, which ran from the fourth quarter of 2007 through the fourth quarter of 2019. The current cycle’s rate also matches the long-term average growth of 2.2% since the first quarter of 1947. In the market, the Nasdaq was down 11% from its record high on Thursday, as investors worried that data center construction could slow amid higher borrowing costs, the Associated Press reported. A strong productivity reading thus coincided with pressure on technology stocks, as financing for AI infrastructure projects faced concerns tied to borrowing costs and capital markets.

The results of the U.S. midterm elections brought renewed attention to concerns about possible restrictions or a temporary halt to data center projects. The Associated Press said AI stocks globally came under pressure as concern grew that data centers could face a moratorium following Democratic victories. In its coverage of the results, the agency reported that Democrats captured at least five governorships and secured full control of the governments of five other states. The agency cited a Morgan Stanley report saying decisive results raised the likelihood of data center restrictions and that new rules could leave some areas open to projects and others closed. Reuters also reported that approved ballot initiatives could limit construction in the coming months and years, while declines in stocks and bonds reduced financing opportunities for participants in the data center expansion.

The Bureau of Labor Statistics is scheduled to release its preliminary revision of third-quarter productivity and cost data on December 8, 2026. The revision will update the current quarterly reading, which showed nonfarm business productivity rising 3.6% at a seasonally adjusted annual rate. The data currently published also show unit labor costs falling 0.7% during the quarter, while rising 2.4% over the latest four quarters. The revision is due as concerns cited in news coverage over the financing costs of data center projects and the possibility of construction restrictions persist. The upcoming release covers the same period in which output rose 3.7% and hours worked increased 0.1% in the third quarter.