Productivity Boom

Extracted Attributes

• Type

  Economic Phenomenon

• Purpose (Proposed)

  Win AI Arms Race against China

• Recent Impact (2023)

  Significant gains in Americans' real wages, higher household consumption

• Key Actors (Proposed)

  Hyperscalers building AI factories

• Policy Tools (Proposed)

  Tariffs for Onshoring, 100% Immediate Expensing

• Primary Driver (Proposed)

  Artificial Intelligence (AI)

• Recent Causes (2021-2022)

  Strong labor market, investment in productivity-enhancing capital goods, work from home adoption, shift from low-productivity to high-productivity jobs

• Energy Strategy (Proposed)

  Scale-up of Natural Gas and Nuclear Energy

• Initial Catalyst (Proposed)

  Capital Expenditure (Capex) Boom

• Historical Example (1873-1890)

  Labor productivity rose more than 2.5% per year

• Historical Example (1995-2004)

  Driven by information and communications technology innovations

• Historical Example (Early 20th Century)

  Led by automobile industry and manufacturing, labor productivity rose about 3.75% per year

Timeline

• First episode of strong productivity growth in the United States, with labor productivity rising more than 2.5% per year. (Source: Web Search)

  1873-1890

• A productivity spurt in the US, with labor productivity rising about 3.75% per year, led by the expansion of the automobile industry and robust productivity gains in manufacturing. (Source: Web Search)

  1900-1927

• Exceptional productivity boom in the US, driven by information and communications technology innovations. (Source: Web Search)

  1995-2004

• Beginning of the ongoing AI boom, characterized by rapid progress in artificial intelligence. (Source: Wikipedia)

  2010s

• AI boom gains international prominence with advancements in generative AI technologies and scientific applications. (Source: Wikipedia)

  2020s

• A period of intense labor demand in the US, where businesses invested significantly in productivity-enhancing capital goods, work from home became permanent, and Americans shifted to higher-productivity jobs, planting seeds for increased efficiency. (Source: Web Search)

  2021-2022

• Strong US productivity observed, which allowed workers to achieve strong wage gains without employers having to pass on significantly higher costs to consumers. (Source: Web Search)

  2023

• Proposed transition from an AI-driven Capex Boom (hyperscalers building AI factories) into a widespread Productivity Boom across the US economy, as part of a strategic vision to win the AI Arms Race. (Source: Document 6fe8de57-cccf-428f-9e98-50534833bad5)

  Future

AI boom

The AI boom is an ongoing period of rapid progress in the field of artificial intelligence (AI) that started in the late 2010s before gaining international prominence in the 2020s. Examples include generative AI technologies, such as large language models and AI image generators by companies like OpenAI, as well as scientific advances, such as protein folding prediction led by Google DeepMind. This period is sometimes referred to as an AI spring, to contrast it with previous AI winters.

Web Search Results

• America's Productivity Boom - by Joseph Politano

  Yet perhaps the more notable productivity boom comes from sectors that were previously stagnant but shocked into efficiency over the last five years. The archetypical example here is food service—it is difficult to make the process of cooking and serving food more efficient, and wage levels for cooks & waiters had long been low enough to preclude the need for greater automation. Thus, productivity gains were minimal even as the sector grew from 6.5M employees in 1990 to 12.1M employees in 2019. [...] The causes of this boom are multifaceted but primarily stem from the strength of America’s labor market in 2021 and 2022, when businesses invested significantly in productivity-enhancing capital goods, work from home became a permanent facet of white-collar life, and Americans quit low-productivity jobs for high-productivity ones at record rates. That period of intense labor demand planted seeds that have sprouted into even greater efficiency as the labor market has cooled—newly hired employees [...] It is essential for America’s industrial policy efforts that manufacturing productivity growth return eventually, but it is much, much more beneficial for the country overall to have productivity improve among the service-sector jobs that make up the vast majority of employment, consumption, and economic output. The recent productivity boom has delivered significant gains in Americans’ real wages throughout the pay distribution, which in turn has enabled higher household consumption and

• FRB: Speech, Ferguson--Lessons from past productivity booms

  period is somewhat subjective, we take as the first episode of strong productivity growth-or productivity boom, if you will-roughly the period from 1873 to 1890. During this period, labor productivity rose more than 2-1/2 percent per year, a rate thought to be considerably higher than the average growth experienced over the first 100 years of the United States.5 An important element of the analysis of this and other periods is the decomposition of output per hour into its underlying sources, [...] enjoyed a relatively brief spurt in productivity until about 1927, with labor productivity rising about 3-3/4 percent per year and multifactor productivity up around 2 3/4 percent per year. This productivity boom was led by the expansion of the automobile industry and robust productivity gains in manufacturing more generally. Productivity growth was markedly slower through the Great Depression and World War II, largely reflecting a lack of capital deepening. Multifactor productivity rose at a [...] business financing arrangements and by investments in human capital. Productivity booms in the United States have been of varying duration, but we have seen two of them last as long as twenty years. We do not know definitively what brings these booms to an end. In our experience, however, periods of elevated increases in trend productivity are best fostered in an environment of economic and personal freedom and government policies that are focused on erecting sound and stable macroeconomic

• A US productivity boom may explain how inflation slowed amid a ...

  ### CNN values your feedback Markets Hot Stocks Fear & Greed Index Latest Market News Hot Stocks # A US productivity boom may explain how inflation slowed amid a strong economy Follow: A worker assembles a product at the Intervala manufacturing facility in Mount Pleasant, Pennsylvania, US, on Tuesday, January 30, 2024. [...] “A lot of those companies that laid people off because they were expecting a significant slowdown are now lean and mean,” John Min, chief economist at Monex USA, told CNN. “But the economy did well, so that translated into higher productivity, supporting higher wage growth and fending off inflation from accelerating.” Last year’s productivity boom could also be a combination of all of the above. ## The problem with the data [...] Last year’s strong US productivity meant that workers raked in strong wage gains without employers having to pass on the buck to consumers, at least to a large degree, since they were producing enough in various industries and services to cover for those higher labor costs.

• Investing in productivity growth | McKinsey

  After World War II, Europe and Japan enjoyed strong productivity booms. Populations moved to urban centers as investment rebuilt the cities to accommodate the new residents. Investment in technology supported catch-up with the United States. Only the 1970s energy crises and stagflation brought the boom to an end. [...] Productivity growth means getting more from our work and from our investments (see sidebar “Measuring productivity”). It is especially needed now as the world faces the many challenges of a new geo-economic era. Productivity growth is the best antidote to the asset price inflation of the past two decades, which has created about $160 trillion in “paper wealth” and even larger amounts of new debt. Absent a surge in productivity, we could be headed for a Japan-style wealth reset or a period of [...] The world’s living standards have climbed sharply over the past 25 years, driven by strong productivity growth.1_[Pixels of Progress: A granular look at human development around the world_, McKinsey Global Institute, December 2022; and Max Roser, _The short history of global living conditions and why it matters that we know it_, Our World in Data, 2016.](javascript:void(0);) Median economy productivity surged sixfold over this period.2Based on Conference Board data (from the Total Economy

• Productivity During and Since the Pandemic - San Francisco Fed

  is consistent with the linear broken trend estimate in Figure 1, marking the end of the exceptional 1995–2004 productivity boom from information and communications technology innovations. We estimate the statistical relationship from 1995–2019, so the estimation period ends before the pandemic. [...] In this _Economic Letter_, we discuss how U.S. productivity behaved during and since the pandemic. Productivity initially surged well above its pre-pandemic trend. But as the economy reopened and economic activity rebounded, it soon reverted to that trend. This pandemic boom-and-bust in productivity growth was a predictable cyclical response overlaid on a broad continuation of the underlying slow growth pace. It largely confirms the cautionary arguments in Fernald and Li (2022) before [...] We find a strong cyclical relationship: When unemployment continually rises over the year, productivity tends to rise as well, consistent with prior studies (Fernald and Wang 2016). The green line in Figure 1 shows what the relationship predicts for labor productivity, given the trend and actual changes in the unemployment rate. The predicted values broadly fit the labor productivity boom during the Great Recession, when unemployment rose, and its apparent subsequent weakness as unemployment