From the Nice Recession till 2019, U.S. labor productiveness development disillusioned. Nonfarm-business output per hour grew about 1 p.c a yr from 2010 to 2019, down from 3 p.c within the late Nineties. This slowdown was particularly pronounced in manufacturing, and it coincided with a slowdown within the development of income per employee amongst public corporations. Nevertheless, since 2019, development has picked as much as twice the 2010s charge, round 2 p.c. On this put up, I take advantage of knowledge from corporations’ 10-Okay filings to unpack this current acceleration. I first present that the acceleration seems in public corporations’ income per employee, then doc how the positive factors went into revenue margins, and at last, what agency traits predicted important revenue margin will increase. The rise in revenue margins is in keeping with ongoing declines within the labor share of output.
Agency Productiveness, 2019–2025
This piece research U.S. Compustat corporations throughout each manufacturing and companies over 2010–2025, damaged into two durations: 2010–2019 and 2019–2025. I drop agriculture, utilities, finance, actual property, and public administration, as a result of identified challenges of productiveness measurement in these industries.
Nonfarm-business output per hour grew 1.0 p.c a yr from 2010 to 2019 and a pair of.2 p.c a yr from 2019 to 2025. In Compustat, I discover a related qualitative development acceleration. Actual income per employee—gross sales deflated by trade output costs, divided by employment—traces the identical flip, from 0.7 p.c to 2.2 p.c a yr over the identical time durations.
The chart beneath illustrates this development, exhibiting that each income per employee amongst public corporations and output per hour are accelerating within the current interval. Throughout all datasets, the labor productiveness uptick is actual.
Labor Productiveness and Agency Income Per Employee Accelerated Collectively in 2019-2025
Sources: Bureau of Labor Statistics (BLS); Compustat.
Notes: Labor productiveness, listed to 2019 = 100: Chart exhibits BLS nonfarm-business output per hour and Compustat actual income per employee.
Greater income per employee on the agency degree doesn’t point out who positive factors from this elevated income. The extra income might go to staff, as corporations compete for labor via increased wages, or accrue to corporations in revenue margins. Agency-level knowledge let me measure how corporations’ revenue margins modified over time. I discover how revenue margins modified between 2019 and 2025 and what agency traits predicted markup positive factors.
Agency Revenue Margins
A revenue margin is revenue divided by gross sales: the share of every gross sales greenback the agency retains after paying its prices. The gross margin subtracts the direct value of manufacturing (value of products bought), whereas the working margin additionally subtracts overhead (promoting, normal, and administrative expense, which in Compustat usually consists of R&D). If productiveness positive factors have been flowing to corporations’ income, margins ought to present it. By the 2010s margins have been flat: gross margins grew about 0.4 p.c a yr from 2010 to 2019, and working margins have been roughly flat. Each then turned up: on common, gross margins went from about 34 p.c of gross sales in 2019 to 37 p.c in 2025 (1.3 p.c development per yr), and working margins from 16 p.c to 18 p.c (2.4 p.c development per yr).
Gross and Working Revenue Margins Elevated in
2019-2025
Supply: Compustat.
Notes: Compustat gross margin (COGS) and working margin (OPEX), 2010–2025, sales-weighted; gross on the left scale, working on the fitting scale.
Which Companies Noticed the Largest Positive aspects?
Lastly, I ask whether or not corporations that spend money on intangibles (e.g., analysis and growth, or R&D) skilled the most important positive factors. In earlier work, we confirmed that whereas productiveness development in manufacturing slowed within the 2010s, R&D depth in manufacturing continued to rise. Does R&D depth predict increased revenue margins within the current period?
Companies that entered the interval with increased R&D expenditure relative to gross sales noticed bigger subsequent positive factors: corporations with 10 p.c extra R&D expenditure relative to gross sales in 2019 noticed about 0.7 p.c increased operating-markup development over 2019–2025, and 0.5 p.c over 2022–2025. Companies with increased capital depth didn’t see such a major sample. This sample is in keeping with returns to intangible depth fairly than capital depth. This means a doubtlessly essential position for investments in know-how and intangibles in driving markups.
Measured productiveness has risen since 2019 in each combination and agency knowledge, ending greater than a decade of sluggish development. A part of the positive factors surfaced with wider revenue margins: on an affordable baseline, the working margin rose over 2 p.c a yr from 2019 to 2025. R&D depth seems to be an essential predictor of margin development for corporations, in keeping with the rising returns to high-tech corporations and corporations which have invested in intangibles since COVID. Whether or not these rising margins are returns to important funding in intangibles or purely a windfall for corporations is a subject to discover in future work.
Jeremy Pearce is a analysis economist within the Federal Reserve Financial institution of New York’s Analysis and Statistics Group.
cite this put up:
Jeremy Pearce, “Income per Employee Is Up. Are Companies Getting a Bigger Share?,” Federal Reserve Financial institution of New York Liberty Road Economics, October 15, 2026, https://doi.org/10.59576/lse.20261015
BibTeX: View | Obtain
@article{Pearce2026,
writer={Pearce, Jeremy},
title={Income per Employee Is Up. Are Companies Getting a Bigger Share?},
journal={Liberty Road Economics},
notice={Liberty Road Economics Weblog},
quantity={October 15},
yr={2026},
url={https://doi.org/10.59576/lse.20261015}
}
Disclaimer
The views expressed on this put up are these of the writer(s) and don’t essentially mirror the place of the Federal Reserve Financial institution of New York or the Federal Reserve System. Any errors or omissions are the duty of the writer(s).
