LIVE MARKETS-Productivity, the AI boom, and consequences for the workforce

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PRODUCTIVITY, THE AI BOOM, AND CONSEQUENCES FOR THE WORKFORCE

You don’t hear about it a lot, but productivity is the beating heart of the economy.

"We all have a sense of our own productivity each day, but we often fail to appreciate what productivity means to an economy. Productivity is what defines our standard of living, so productivity growth is a critical component of what drives a growing economy over the long run," writes Philip Palumbo, founder, CEO and chief investment officer of Palumbo Wealth Management, in a note.

Productivity in the economy is a measure that gauges the amount of goods and services produced relative to the resources (labor and capital) used, and Palumbo believes it's "the Holy Grail of economics."

Meanwhile, he cites a recent analysis by the Kansas City Federal Reserve that found that the relatively subdued productivity growth evident in the 2010s is giving way to a period of faster growth as a result of the artificial intelligence (AI) boom.

The critical question remains: What are the consequences for the workforce?

As Palumbo sees it, "The speed of AI development, fueled by massive capital investment from 'mega-cap' tech firms, is staggering. While productivity may soar, there is a risk that the 'real' economy—and its workforce—cannot adapt at the same pace, leading to significant employment dislocations."

He is heartened to see productivity emerge from its long slumber. However, Palumbo cautions that as the labor force enters this new reality, it's vital for government policy to keep pace, assisting workers in adapting to an AI-augmented landscape.

(Terence Gabriel)

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