Federal Reserve economists are cautiously optimistic about the potential of generative artificial intelligence (Gen AI) to boost US productivity, but they're not convinced it will lead to significant long-term gains. According to a recent Federal Reserve Board staff paper, Gen AI's impact on labor productivity will depend on how quickly and thoroughly firms integrate the technology.
The economists note that Gen AI may offer a one-time productivity boost, similar to the light bulb, but sustained growth is uncertain. Large corporations and tech-centric sectors are adopting Gen AI at a higher rate than small businesses and other industries. Widespread adoption will require significant investments in complementary technologies, organizational changes, and reliable access to computational and electric power infrastructure.
Despite the potential, the economists highlight that the main hurdle is the diffusion of Gen AI into widespread use, which could take decades. Investing blindly in Gen AI trends poses risks, similar to past tech booms, and the profitability of Gen AI use at scale in a business environment is still uncertain.
Gen AI could be a game-changer for productivity, acting as a transformative platform and method for accelerating invention. It is increasingly used in scientific research, enhancing observation, analysis, communication, and organization. However, the share of jobs requiring AI skills is currently low, and demand has grown modestly since 2017.
As the US economy continues to evolve, it remains to be seen whether Gen AI will live up to its potential and drive sustained productivity growth. For now, the economists' cautious optimism serves as a reminder that the impact of Gen AI will depend on a variety of factors, including adoption rates, investment, and infrastructure.
