Economists and CEOs disagree about whether artificial intelligence will make American workers more productive yet.
Zoom out, however, and a quieter trend hides in the data. For years, “labor productivity” — an economic measure of how much each worker produces — has been rising at its fastest pace in at least two decades. Artificial intelligence is just a fresh ingredient in the gumbo of forces driving the trend, not the central one, at least for now. Tight labor markets, digitization and remote work are among other parts of the mix.
“I never thought I would see so many years of really high productivity, and by the way, expect it to continue,” Jerome H. Powell told reporters in March before stepping down as chairman of the Federal Reserve. “And we haven’t really started to see the effects of generative AI”
A potential win-win
In the best of times, productivity gains are a sign that workers are using new tools or updated methods to work more efficiently; smarter, not just harder. This can offer a win-win for workers, customers and business owners: If companies can produce more in the same or fewer working hours, then they can presumably increase revenue, reinvest in operations and pay workers more, all without sacrificing profitability – or relying on price increases to push profits higher.
Henry McVey, a chief investment officer at KKR, a private equity firm, said he saw exactly that across his portfolio — in health care, technology and retail. Restaurant chains use cloud computing to better manage inventory. Telecommuting has helped companies hire from a larger talent pool. Medical records have gone digital.
“I think the productivity gains started to come out of Covid with the digitization of work, telecommuting and the implementation of machine learning – and we’re just scratching the surface of AI,” said Mr. McVey.
Another driver behind sunnier productivity numbers has been low unemployment, which has remained at or below 4.5 percent since October 2021 — the longest streak since the 1960s. When almost everyone who wants a job has one, employers must pay more to attract workers, pushing them to find efficiencies elsewhere.
It could become self-reinforcing, said Chirag Lala of the Center for Public Enterprise, a nonprofit focused on economic development, especially if artificial intelligence starts to pay off. “Once we get going with a trend in consumption, incomes or productivity, it’s like inertia,” he said. Breaking it requires a serious shock.
Staffing adjustments
Mr. McVey pointed to another, more solemn reason why productivity has increased: job cuts. There have been significant layoffs in finance and technology, two industries that generate a large share of the company’s profits. Technical employment has shrunk for 18 months in a row. Finance has lost more than 100,000 jobs since a peak in May 2025.
A Federal Reserve survey of businesses this spring noted that many companies said AI-driven efficiencies had allowed them to delay or skip hiring altogether. A separate index of corporate earnings calls, compiled by Bloomberg, reported a reduced appetite for hiring in nearly all industries.
In the Permian Basin of west Texas, the heart of America’s world-leading oil industry, companies are running leaner than ever, said Steve Pruett, CEO of Elevation Resources. He credits industry consolidation along with better drilling technology.
“We used to just drill two miles down and a mile out,” said Mr. Pruett. “As the technology improved and we got better at it, we’re still drilling two miles deep, but now we’re drilling two miles out, the well is producing more, there’s better return on the ‘longer laterals’ and better productivity per rig.”
Around the time Elevation was founded in 2013, the oil and gas industry employed about 200,000 people. By this summer, it had fallen to around 115,000, even as profits and production per work increased.
The job loss is clearly bad news for the workers who are affected when companies become leaner. But economists generally see “doing more with less” as a plus for the economy in general.
For the “professional and business services” sector, tracked by the Labor Department, productivity growth has been at or above 3 percent annually since 2021. Employment in the sector has fallen since 2023, leading to a number of discouraged job seekers — although the health care, social assistance and education sectors have helped pick up overall job growth.
The economy’s continued better-than-expected growth, despite subdued immigration and waves of baby boom retirements, is also a sign of increased productivity among “prime-age” workers aged 25 to 54.
Reasons for caution
Not everyone is convinced of a rosy reading of the latest productivity data. Productivity numbers are notoriously noisy in the short term, skeptics note. And to the extent that tech evangelists have attributed existing gains to artificial intelligence, some experts remain unconvinced. Yale Budget Lab’s AI Labor Market Tracker, for example, found no clear correlation between AI adoption and employment changes.
“There are multiple possibilities here, and the productivity data in particular is really hard to interpret,” said Martha Gimbel, Yale Budget Lab’s executive director.
Productivity is simply output divided by hours worked. But it is also measured by economists in “real” terms, meaning the “output” side of the equation is inflation-adjusted. So fleeting increases in inflation can drag down overall productivity numbers, even when workers are no less efficient than before.
Last year’s tariffs and this year’s oil price shock from the war with Iran both pushed up inflation, which could make productivity look weaker in the short term than it actually is. Even so, oil prices have now fallen from their wartime peaks. If it holds, productivity data could look better later this year.
Who will share in the fruits?
Whether the companies’ efficiency gains will be shared with households is an open question. For years, wages have lagged behind productivity growth, reducing workers’ share of national income.
“If real compensation lags productivity growth, the labor share falls,” said Jared Bernstein, who served as chairman of former President Joseph R. Biden Jr.’s Council of Economic Advisers. Over the past decade, productivity growth has been twice real compensation growth, according to Mr. Bernstein’s analysis.
An axiom in economics is that productivity initially appears “everywhere except the productivity statistics,” as Nobel laureate Robert Solow put it. After all, it was only in the 2000s that the productive effects of the Internet and personal computer boom of the 1990s became apparent.
Mike Skordeles, head of US economics at Truist, a bank based in Charlotte, NC, said he was already producing more research than before — a result of improved tools for data analysis and modeling.
Just a few years ago, he said, “I would have had or hired three lower-level junior economists to do some of the mapping and things that I can now do at the click of a button.”
