Hopefully, you know that the AI is coming and will be in very wide use soon, but what does it mean for the labor market and long-term growth? For those of in the baby boom generation, having money for retirement will soften what the labor market is doing or not doing. For others, it is a very important question.

In an article by Chris Wilson-Smith of Reuters, there are competing views turn on whether the latest wave of AI behaves like earlier technological breakthroughs, with productivity gains arriving only after costly reorganization or whether its acceleration marks a shift in which automation outpaces the creation of a new economic activity.

AI-related capital spending (capex) contributed to 1.1% to US economic growth in the first half of 2025, outpacing household consumption in an economy typically driven by consumer spending, a recent report from JPMorgan Chase shows. The report’s author noted that data centers once built employ few workers compared to a factory or office campus. This limits the job creation and local spending that usually follow large investments, a dynamic economists refer to as the multiplier effect.

Serdar Ozkan, a senior policy advisor for the Federal Reserve Bank of St. Louis, says AI investment follows a much longer pattern of general-purpose technologies the reshaped economies, only after years of adaption. From electrification to the rise of computers to the early internet. The visible promise of each wave arrived well before the productivity data showed measurable effect, largely because firms needed time to redesign workflows and workers had to build complementary skills.

David Rosenberg, founder of the economic consulting firm Rosenberg Research & Associates said there is a key distinction between technologies that expand an economy’s productive capacity and those that speed up tasks the companies already confirm.

AI is in latter category. This will tend to compress labor demand rather than create new forms of economic activity. This is pure job replacement with very little offsetting multiplier effect.

Earlier technological cycles eventually increased output as firms reorganized and new industries formed. But AI is narrowing the process by directly competing white-collar tasks, rather than enabling workers to do more.

Linking to dividend paying stocks, if the head count or labor employed by a profit-making company goes down, it means a cost has gone down and the company can make greater profits with less people. What is good for the company, may not be good for the individual which means your investments will tend to go up in value.

There are more questions than answers, till the next time – to raising questions.