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Fellow hamsters, if it felt like you were running faster or maybe smarter on the old exercise wheel in your cage last quarter, you were, according to the U.S. Bureau of Labor Statistics.  The question is how many hamsters survived to enjoy the workout.

The BLS reported Thursday that nonfarm business sector labor productivity increased a seasonally adjusted annualized 2.4 percent in the second quarter of 2025, as output increased 3.7 percent and hours worked increased 1.3 percent.  That was up from a revised productivity decrease of 1.8 percent in the first quarter.

And the average hamster was getting somewhere, too. Adjusted for consumer prices, real hourly compensation increased an annualized 2.3 percent in the second quarter.  Real compensation was up 1.4 percent over the last four quarters through 2Q25.

Meanwhile, unit labor costs, that is, the ratio of hourly compensation to productivity growth rates, increased an annualized 1.6 percent in the second quarter, a slowdown from the four quarters rate of 2.6 percent, good news for businesses that will have to deal with higher costs from other inputs due to Trump’s tariffs.

Now, productivity growth is hailed as key to how the working stiff like your correspondent and his fellow hamsters get ahead of the game in this vale of tears.  But the problem, as we see it, is that productivity gains from fewer hamsters would be a recipe for social unease and a reason to keep the cork in the champagne.  The sharp downward revisions to May and June payrolls reported last week point to a disconnect in the relationship between rising productivity and a tide lifting all boats.

We think the second quarter productivity and payroll numbers could reflect the first ripple of the artificial intelligence revolution that is about to reinvent work and likely replace a lot of us.

Also on the labor front, weekly initial jobless claims increased 7,000 to a seasonally adjusted 226,000, the highest in a month.  More telling, perhaps, was news that continuing claims rose 38,000 to 1.974 million, the highest since November 2021, an indication that finding a new hamster cage is getting tougher.

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