Economists and chief executives are divided over whether artificial intelligence is making American workers more productive yet.
Zoom out, though, and a quieter trend is hiding in the data. For years now, “labor productivity” — an economic measure of how much each worker produces — has been climbing at its fastest pace in at least two decades. Artificial intelligence is merely a fresh ingredient in the gumbo of forces propelling 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’d see this many years of really high productivity and, by the way, expect it to continue,” Jerome H. Powell told reporters in March, before he stepped down as Federal Reserve chair. “And we haven’t really started to see the effects of generative A.I.”
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 to workers, customers and business owners: If firms can produce more in the same or fewer work hours, then presumably they can increase revenue, reinvest in operations and pay workers more, all without sacrificing profitability — or relying on price increases to push profits higher.
Henry McVey, an investment chief at KKR, a private equity firm, said he was seeing exactly that across its portfolio — in health care, tech and retail. Restaurant chains are using cloud computing to manage inventory better. Remote work has helped companies hire from a bigger talent pool. Medical records have gone digital.
“I believe the productivity gains began coming out of Covid with the digitization of work, remote work and the implementation of machine learning — and we’re just scratching the surface on A.I.,” Mr. McVey said.
Another driver of sunnier productivity numbers has been low unemployment, which has stayed at or below 4.5 percent since October 2021 — the longest streak since the 1960s. When nearly everyone who wants a job has one, employers have to pay more to attract workers, which pushes them to find efficiencies elsewhere.
That can become self-reinforcing, said Chirag Lala of the Center for Public Enterprise, a nonprofit focused on economic development, especially if artificial intelligence starts paying off. “Once we get started on a trend with consumption, incomes or productivity, it’s like inertia,” he said. Breaking it takes a serious shock.
Staffing adjustments
Mr. McVey pointed to another, more solemn reason productivity is up: job cuts. There have been significant layoffs in finance and tech, two industries that generate an outsize share of corporate profits. Tech employment has shrunk for 18 consecutive months. 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 A.I.-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 every industry.
In the Permian Basin in West Texas, the heart of America’s world-leading oil industry, companies are running leaner than ever, said Steve Pruett, chief executive of Elevation Resources. He credits industry consolidation, along with better drilling technology.
“We used to just drill two miles down and one mile out,” Mr. Pruett said. “As tech improved and we got better at it, we still drill two miles deep, but now we drill two miles out, the well produces more, there are better rates of return on those ‘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 that had fallen to roughly 115,000, even as profits and output per worker climbed.
The job loss is clearly bad news for the workers affected when companies become leaner. But economists generally view “doing more with less” as a plus for the economy overall.
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 slew of discouraged job seekers — even as the health care, social assistance and education sectors have helped pick up the slack in overall job growth.
The economy’s continued better-than-expected growth, despite subdued immigration and waves of baby boomer retirements, is also a sign of the increased productivity among “prime-age” workers ages 25 to 54.
Reasons for caution
Not everyone is convinced of a rosy read on recent productivity data. Productivity numbers are notoriously noisy in the short run, skeptics note. And to the extent tech evangelists have attributed existing gains to artificial intelligence, some experts remain unconvinced. The Yale Budget Lab’s A.I. Labor Market Tracker, for instance, has found no clear link between A.I. adoption and employment changes.
“There are several possibilities here, and the productivity data in particular is really hard to interpret,” said Martha Gimbel, the Yale Budget Lab’s executive director.
Productivity is, most simply, output divided by work hours. But it is also measured by economists in “real” terms, meaning the “output” side of the equation is inflation-adjusted. So volatile spikes in inflation can drag down the headline 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 inflation up, which may make productivity look weaker in the short run than it actually is. Still, oil prices have now fallen from the peaks during the war. If that holds, productivity data could look better later this year.
Who shares in the fruits?
Whether corporate efficiency gains will be shared with households is an open question. For years, pay has lagged productivity growth, diminishing laborers’ share of national income.
“If real compensation lags productivity growth, labor’s share falls,” said Jared Bernstein, who served as chair of former President Joseph R. Biden Jr.’s Council of Economic Advisers. Over the past decade, productivity growth has been double real compensation growth, according to Mr. Bernstein’s analysis.
An axiom in economics is that, at first, productivity shows up “everywhere except the productivity statistics,” as the Nobel laureate Robert Solow put it. It wasn’t until the 2000s, after all, that the productive effects of the internet and personal computing boom of the 1990s showed up.
Mike Skordeles, the head of U.S. Economics at Truist, a bank based in Charlotte, N.C., said he was already producing more research than previously — a result of improved tools for data analysis and modeling.
Only a few years ago, he said, “I would have had or hired three lower-level junior economists doing some of the charting and stuff that I can now do with the click of a button.”