These tweets caught my eye:
I think that it could be doable to create some type of argument that the AI growth is hurting the job market, however on the threat of being unserious I don’t discover this one to be notably persuasive. Suppose I made the next argument:
Rates of interest could be decrease if we went into recession, which might assist employment. “Economic booms don’t hurt the job market” is an unserious view.
Very long time readers have most likely guessed that I’d view this hypothetical declare for instance of the fallacy of “reasoning from a price change.”
In some respects, it’s stunning that the labor market is so sturdy. We had a interval of excessive inflation throughout 2021-23, and unemployment usually rises sharply when the Fed makes use of a restrictive financial coverage to deliver inflation again down. Why has unemployment merely edged up from 3.4% to 4.2%? I’m not sure, however maybe as a result of the disinflation coverage was gradual, and even as we speak inflation stays above the Fed’s 2% goal. Nonetheless, if the labor market is presently a bit subpar, it’s most likely because of the lingering results of the Fed’s anti-inflation coverage, not the AI growth.
I definitely agree with claims that unemployment may rise if the Fed pushed rates of interest above their pure fee. However an AI growth tends to lift the pure fee of curiosity. Different issues equal (together with the Fed’s goal rate of interest), a better pure fee of curiosity is definitely expansionary—more likely to result in sooner NGDP progress. In fact different components such because the decrease fee of immigration have a tendency to cut back the pure fee of curiosity, so I’m agnostic on the query of whether or not financial coverage is presently too tight. (As an apart, TIPS markets are presently pricing in about 2.5% inflation over the following 5 years, which doesn’t recommend that cash is especially tight.)
Maybe there’s an argument that AI spending crowds out extra labor intensive industries, though in precept the Fed ought to offset that impact. In fact financial coverage will not be good, however the web growth of 1999-2000 doesn’t appear to have damage the labor market. In 2000, unemployment fell to the bottom stage because the Nineteen Sixties. We ultimately did have a light recession, after the Fed engineered a lot slower NGDP progress in 2001.
