The Hires-Exceed-Fires Economy

The strength of May’s employment report surprised many, debunking the notion that the US labor market is mired in “low-hire, low-fire” stagnation. But it confirmed the views of Ed and Elias. They expect demand for labor to continue to improve and supply to remain structurally constrained. This should keep unemployment low, boost productivity, and sustain wage growth. That shouldn’t cause an inflationary wage-price spiral over the long term; the AI-sparked productivity boom should keep unit labor costs in check, in line with our longer-term Roaring 2020s hypothesis. But near-term risks remain: The AI buildout is inflationary, and higher wage growth could add price pressure before offsetting productivity gains materialize. … Also: Elias discusses five economic impacts of AI.