Torsten Slok: AI Isn't Killing Jobs, It's Boosting the Economy

In a recent Bloomberg Talks appearance, Torsten Slok, Chief Economist at Apollo, offered a nuanced perspective on the burgeoning impact of artificial intelligence on the US economy and labor market. Contrary to widespread anxieties about AI leading to mass unemployment, Slok presented data suggesting a more optimistic outlook, where AI acts as a catalyst for productivity and economic expansion, rather than a harbinger of job displacement.

Debunking AI Job Loss Narratives

Slok directly addressed the common fear that AI will eliminate jobs, stating, "There is zero evidence that job losses are happening because of AI." He elaborated that while individual companies might automate certain tasks, the broader macroeconomic picture indicates that AI is actually facilitating the creation of new businesses and increasing overall productivity. This, in turn, is expected to lead to more job opportunities, not fewer.

He pointed to data from sources like Stripe, which show an "exploding" number of new businesses being created each week. While some of these might be small, single-founder ventures, Slok emphasized that many are poised to grow and create substantial employment. He contrasted this with historical fears of technological unemployment, suggesting that AI's current trajectory is more akin to past productivity booms that ultimately benefited the labor market.

The full discussion can be found on Bloomberg Podcast's YouTube channel.

AI's Dual Impact: Productivity and Job Creation

Slok highlighted that the narrative surrounding AI is shifting from one of job destruction to one of job creation and enhanced productivity. He noted that the data suggests that while some roles might be automated, the overall economic environment fostered by AI adoption is leading to the formation of more businesses and, consequently, more jobs. "It's not only about individual companies; it's what's happening at the macro level," Slok explained. "It's become a much easier to open a business."

He further elaborated on this by referencing data on the unemployment rate for younger demographics. "The unemployment rate for people between 20 and 24 years old has gone down significantly over the last six months," Slok stated. This trend, he suggested, contradicts the narrative that young people are struggling to find employment due to AI. Instead, he posited that AI is contributing to a more dynamic labor market where new opportunities are emerging.

The Fed's Tightrope Walk: Inflation vs. Growth

The discussion then pivoted to the Federal Reserve's monetary policy, with Slok addressing the question of whether the Fed is undergoing a "stress test." He noted that the current economic environment presents a unique challenge for the Fed, characterized by strong AI-driven growth alongside persistent inflationary pressures. "The market is debating whether the Fed is going to cut rates," Slok observed.

Slok indicated that the Fed's dual mandate of controlling inflation and promoting employment is being tested by these opposing forces. While disinflationary pressures are present, the robust economic growth, fueled in part by AI investment, suggests that the Fed might need to maintain higher interest rates for longer than initially anticipated. He pointed to key economic indicators like semiconductor prices, energy costs, and automotive sector performance as factors influencing this delicate balance.

The Price of AI and Future Economic Outlook

Slok touched upon the perception of AI's cost and its impact on inflation. While some CEOs are excited about the potential of AI to replace human labor, Slok cautioned that the reality is more complex. He suggested that the cost of implementing AI solutions and the ongoing demand for human oversight and complementary skills are crucial factors. "It's not just about the AI boom; it's also the one big beautiful bill," he remarked, alluding to the significant investments required in AI infrastructure and talent.

He concluded by emphasizing that the economy is experiencing a unique period of growth driven by both technological advancement and a strong labor market. "This economy really is on fire," Slok stated. He believes that as AI adoption continues, it will likely lead to increased productivity and, in turn, higher demand for labor, creating a virtuous cycle of economic expansion. However, he also acknowledged the ongoing debate about the precise impact of AI on different sectors and the potential for shifts in the types of jobs available, suggesting that managing expectations and adapting skills will be crucial for the workforce moving forward.