AI’s machine learning may net productivity gains and influence Fed
Members of the Federal Reserve’s rate-setting committee say they are factoring increased workforce productivity into their economic forecasts as a result of more widespread adoption of artificial intelligence technology.
Fed Chairman Jerome Powell touched on this issue at his December press conference, saying that in past tech waves “there were always more jobs, higher productivity, and rising incomes. What happens here? We’ll have to see.”
Economists and investors say productive AI tools in particular have the potential to increase worker productivity and shake up the labor market. These machine learning-powered tools may improve over time as more people use them to improve their businesses, according to researchers writing in the National Bureau of Economic Research.
St. “That’s because AI can learn. People can also try to use AI more effectively and train AI to suit everyone. And the resulting productivity gains are huge,” said co-author Ping Wang, an economics professor at Washington University in St. Louis. “Artificial Intelligence and Technological Unemployment.”
Wang and his co-author, Tsz-Nga Wong, a senior economist at the Federal Reserve Bank of Richmond, modeled several scenarios for the development of artificial intelligence. In the “unlimited growth” scenario, where technology is fully developed over decades, 23% of workers lose their jobs and labor productivity increases by three to four times.
“In the next decade, which is more like an interim period, labor productivity will increase by about 7% per year,” Wang said in an interview with CNBC. He noted that this is a hypothetical scenario that may not happen.
Potential impacts could impact the employment aspect of the Federal Reserve’s dual mandate. In December, the Federal Open Market Committee projected the federal funds rate to settle near 3% over the long term. This would be a moderately accommodating stance compared to the forecast medium-term neutral interest rate of 3.7 percent. Cleveland Fed economists.
Some investors see similarities between today’s rush to build data centers and the boom in capital spending on network components in the 1990s.
“The fact that we’re seeing an increase in valuations makes us a little bit more cautious about future returns,” Dan Tolomay, chief investment officer of Trust Company of the South, said in an interview with CNBC.
watch video To learn more about how AI is influencing the Fed’s economic outlook.
