U.S. workers are taking home the smallest slice of GDP since records began in 1947, according to new federal data.
Numbers from the Bureau of Labor Statistics show that the share of economic output paid to workers through wages and salaries dropped sharply in the third quarter of last year. The figure landed at 53.8%, marking the lowest level ever recorded in the modern data series tied to GDP.
That reading was down from 54.6% in the previous quarter and well below the 55.6% average seen so far during the 2020s. The data came from the BLS report on labor productivity and costs released Thursday.
While GDP continued to grow, the portion going to workers kept shrinking, even as companies reported some of the strongest profit margins seen in decades.
The labor share measure has been tracked since 1947 and surged briefly in 2020 during the height of the pandemic. Since then, it has moved steadily lower. Over the same period, corporate profits climbed, raising fresh concerns about income gaps inside the U.S. economy as GDP expansion failed to lift worker pay at the same pace.
Productivity rises as hiring stays muted
The same BLS report showed labor productivity in the U.S. jumped at the fastest pace in two years during the third quarter.
Economists linked part of that increase to the growing use of artificial intelligence across companies. The rise in productivity occurred alongside falling labor share levels tied to GDP, creating a split picture of economic gains.
Economists said more data will be needed to understand how AI affects jobs and pay. On one side, higher productivity can support faster GDP growth without pushing inflation higher. On the other, companies can increase output while hiring fewer workers, putting pressure on wages tied to GDP growth.
The BLS defines labor share as “the percentage of economic output that accrues to workers in the form of compensation.” That includes wages, salaries, bonuses, and pension contributions. Despite solid GDP expansion, that percentage continued to fall.
Federal Reserve Bank of Richmond President Tom Barkin said recent employment data points to modest job growth and a low-hiring environment. Figures released Friday by the Bureau of Labor Statistics showed employers added 50,000 jobs last month. The unemployment rate edged down to 4.4%, even as hiring slowed.
“This fine balance between a modest job growth environment with a modest labor-supply growth environment seems to be continuing, and that was encouraging,” Barkin told reporters Friday.
Barkin said businesses remain cautious and are relying on productivity gains to operate with fewer workers. He said this approach has shaped hiring decisions while GDP continues to expand.
He added that Federal Reserve officials must stay alert to the risks of higher unemployment and persistent inflation.
Policymakers cut the benchmark interest rate for a third straight meeting last month but remain divided over further cuts due to uncertainty around inflation and the labor market.
Investors currently expect two quarter-point rate cuts this year. Markets do not see another move until April or June.
“Inflation has been above our target now for almost five years,” Barkin said. “It’s in a lot better shape than it was two or three years ago, but it’s certainly not all the way there.”
“The unemployment rate has ticked up in the last year, and job growth is modest,” he said. “So I think you’ve got to watch both of them.”
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