The significant leap in productivity is key to interpreting the current dynamics of the U.S. economy. Companies are making substantial investments in the field of artificial intelligence while simultaneously slowing their hiring pace, driving worker productivity to its fastest growth rate in two years. The growth of the U.S. Gross Domestic Product (GDP) no longer relies on massive labor input, allowing the U.S. economy to expand without requiring American workers to expend more physical or mental effort. Data from the U.S. Department of Labor shows that the annualized growth rate of output per hour worked in the third quarter reached 4.9%, a level matching the peak seen since 2023. Joe Brusuelas, Chief Economist at RSM, wrote in a report on Thursday that the average productivity growth over the past six months has been 4.5%, calling this "unambiguously good news." If companies can demonstrate the efficient utilization of their investments in both human resources and artificial intelligence, there is potential for an improvement in the standard of living for the American people. However, during this same period, while the U.S. economic growth rate reached 4.3%, the growth in employment positions has been notably weak. In a sense, businesses are thriving, yet the signal being sent on platforms like LinkedIn is one of "no need to hire more hands." Concurrently with the productivity surge, expectations of rising unemployment, a stagnating hiring market, and widespread anxiety fueled by automation all point towards an impending economic and social predicament. The productivity gains driving GDP growth could also exacerbate weakness in the job market, further widening the divergence within a K-shaped economy. It is unsurprising that companies, encouraged by the ability to achieve growth while reducing their workforce size, are emulating this phenomenon. If the efficiency gains from AI—or simply reducing investment in new hires—can lower labor costs while boosting profits, then leaner staffing may become the new industry norm. According to traditional economic theory, GDP growth will ultimately lead to an increase in employment over the long term. But for now, at least, the benefits of economic growth are not reaching American workers, and the transition driven by artificial intelligence has only just begun. Christopher Rupkey, Chief Economist at FWDBONDS, wrote in a report on Thursday: "Given that productivity continues to support economic growth, the earlier predictions of a U.S. recession have, so far, not materialized." He added: "The only problem is that American workers seem to be marginalized—companies, in their effort to control costs, persistently restrict the hiring of new additional employees."
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