(Yahoo! Finance) - A big jump in productivity helps explain what's been going on in the US economy.
Worker productivity grew at its fastest clip in two years as businesses spent heavily on AI and pulled back on hiring. It took less labor to pump up GDP, generating growth without much more elbow grease or keyboard tapping from American workers.
The Labor Department found the hourly output per worker accelerated at a 4.9% annualized rate in the third quarter, matching levels not seen since 2023.
As Joe Brusuelas, chief economist at RSM, wrote in a note Thursday, the average productivity gain of 4.5% over the last six months is "unmitigated good news."
Should businesses prove they are efficiently wielding their labor and AI investments, that would point to an increase in American living standards.
But even as the economy grew at a 4.3% rate during the same period, job gains have been meager.
In a sense, businesses are thriving while also posting LinkedIn signs of "no more help needed."
A productivity boom coinciding with expected higher levels of unemployment, a frozen hiring scene, and growing anxiety over automation hint at an economic and social predicament. The same productivity gains that are boosting GDP might also encourage a crummier job market and deeper divisions in the K-shaped economy.
It's not surprising that companies have been spurred on by the results of making do with fewer employees. If AI efficiencies — or simply shrinking investments in new workers — have lowered labor costs while lifting profits, smaller headcounts might be the new norm.
In the aggregate, over time, GDP gains can encourage job creation, the thinking goes. But at least for now, the spoils of growth aren't showering down on American workers, and the AI transformation is just getting started.
"So far the forecasts for a US recession are coming up dry as productivity continues to backstop growth," Christopher Rupkey, chief economist at FWDBONDS, wrote in a note on Thursday.
"The only thing missing," he added, "is that American workers seem to be left by the wayside with companies continuing to keep costs down by limiting the hiring of additional workers."
By Hamza Shaban - Senior Reporter
