TreasureX Researchfed.blogRising Revenue per Worker May Be Padding Profits, Not Just Paychecks
Liberty Street Economics, Federal Reserve Bank of New York · October 15, 2026
US labor productivity growth slumped for a decade after the Great Recession, with output per hour rising only about 1% a year from 2010 to 2019 — far below the 3% pace of the late 1990s. Manufacturing was hit especially hard. Since 2019, however, growth has roughly doubled to around 2%, and new research using corporate 10-K filings shows this rebound is visible in public companies' revenue per worker.
The more important finding is where those gains went. Rather than flowing mainly to workers through higher pay, a meaningful share showed up in profit margins. The pattern is consistent with a continuing decline in labor's share of total output — meaning companies are capturing more of each dollar of revenue as profit. The research also identifies which types of firms were most likely to post large margin increases.
Why it matters for investors: if productivity gains are being converted into margins rather than wages, corporate earnings could stay elevated even without explosive revenue growth, supporting equity valuations. But it also raises questions about how long that split can persist, and it puts labor-cost trends and pricing power at the center of company analysis. For anyone tracking profit margins as a driver of returns, the message is to watch revenue per employee as an early signal of margin direction.
Originally published by Liberty Street Economics, Federal Reserve Bank of New York: https://libertystreeteconomics.newyorkfed.org/2026/10/revenue-per-worker-is-up-are-firms-getting-a-larger-share/
Educational content only, generated with AI assistance from public research abstracts. Not investment advice.