Productivity Is Up, Along With Hopes It Will Fuel the Economy

The American economy is experiencing surprising economic growth and wage gains, reminiscent of a similar period thirty years ago. This growth is accompanied by moderating inflation. The Federal Reserve is cautiously optimistic about the sustainability of this economic momentum and whether it will lead to a pickup in inflation. The recent increase in productivity, driven by new technologies like artificial intelligence and hybrid work setups, is also contributing to this growth. If productivity continues to improve, it could have significant positive implications for the economy, including higher wages and increased profitability for businesses. While there are similarities to the situation in 1994, economists are hesitant to declare a turning point just yet. In the late 1980s, computers had not yet made a significant impact on productivity, leading to what was known as the productivity paradox.