Is AI Moving the Economic Needle? (economics.bmo.com)

Business investment in AI is significantly boosting the U.S. economy, with a surge in IT and software spending driving nearly a third of recent GDP growth. Major tech firms like Meta, Amazon, Alphabet, and Microsoft are collectively investing hundreds of billions in AI technologies, data centers, and microchip fabrication, indicating a strong commitment to expanding AI infrastructure. However, import-heavy AI-related equipment has widened the U.S. trade deficit in IT goods, partially offsetting the pure growth impact of domestic spending. Despite the rapid increase in AI investments, there is little evidence so far that AI is translating into noticeable productivity gains or broad-based employment shifts. Unlike the productivity leap during the Internet boom, labor productivity growth has remained subdued, and a recent MIT study found most firms using generative AI have yet to see returns on their investments. Employment trends show no major job losses attributable to AI, but hiring patterns are shifting—entry-level roles in AI-automatable occupations are shrinking, while demand is rising for experienced workers and positions augmented by AI. Overall, AI is clearly moving the economic needle through capital investment and infrastructure buildout, but its transformative effects on productivity and the workforce remain emergent. The full economic payoff may require more time as businesses adapt to new technologies and integrate AI more deeply into their processes.