US labor share hits record low as corporate margins set new high

September 4, 2026 at 12:30 PM2 min

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The U.S. labor share of income fell to 52.8% in the second quarter, the lowest since records began in 1947, while corporate profit margins reached a record 14.9% of GDP. EY-Parthenon chief economist Gregory Daco said productivity gains that protect margins rather than income largely predate the AI boom. The divergence comes as Treasury Secretary Scott Bessent and Federal Reserve Chairman Kevin Warsh tout AI-driven productivity as deflationary.

Key Facts

The labor share of U.S. income fell to 52.8% in the second quarter, the lowest since the government began tracking it in 1947.
Corporate profit margins reached a record 14.9% of GDP in the same period.
U.S. economic output grew 1.7% in the second quarter on just 0.3% more hours worked.
Data center investment is projected to reach $31 trillion by 2050, according to PricewaterhouseCoopers LLP.

Income Divergence

Workers' share of U.S. income fell to 52.8% in the second quarter, the lowest level since the government started counting in 1947. Corporate profit margins hit a record 14.9% of GDP in the same period. Economic output grew 1.7% in the second quarter based on just 0.3% more hours worked. Compensation rose 2.6%, which EY-Parthenon chief economist Gregory Daco said amounts to flat to slight contraction in real terms after oil-driven inflation.

Productivity and AI

Daco said the productivity gains behind the divergence largely predate the AI boom, stemming from a decade of automation, cost discipline, and capital spending. He wrote in a note Thursday that productivity growth protects margins, not income. Daco said AI has so far delivered further concentration, with greater winner-takes-all dynamics in technological advances. Data center investment is expected to reach $31 trillion by 2050, nearly the size of current U.S. GDP, according to PricewaterhouseCoopers LLP.

Policy Context

Treasury Secretary Scott Bessent and Federal Reserve Chairman Kevin Warsh have said the AI productivity boom will be deflationary and reduce concern about the $40 trillion U.S. debt. Daco noted that in past technological revolutions, large vertically integrated firms initially captured gains while smaller ones faced persistent cost pressures, policy uncertainty, and higher interest rates. He said there is no guarantee AI follows the same timetable as the 1990s, when productivity gains spread quickly and wage growth followed.