US Q2 productivity surges 1.4%, worker pay falls 3.2%

US labor productivity jumped 1.4% annualized in Q2 2026, more than double the 0.6% forecast, marking the fifth consecutive quarter of gains. Manufacturing productivity surged 1.9% on a 4.6% output spike. However, inflation-adjusted worker compensation fell 3.2%—the steepest drop since Q4 2022—while unit labor costs rose only 1.3% versus 2.1% expected. This signals potential disinflation tailwinds and reduced wage-driven inflation pressures, supporting a softer Fed narrative and weighing on USD.