The rise of AI technology is one of the most fascinating innovations in the world today. As it becomes more intertwined with our everyday lives, businesses are also researching the many ways AI can be implemented to increase productivity and profits. As artificial intelligence progresses, how might it impact the overall economy? ITR Economics Senior Forecaster and Presenter Connor Lokar has the answers.
Connor: The hope is that AI will be positive from a productivity standpoint at the macroeconomic level by offsetting some of the population- and demographic-based challenges that many economies, including our own, will be facing. At this stage, it is way too difficult to diagnose what AI’s effects will be at the macro level.
However, we are seeing much more of an impact at the individual market level. For example, data center construction is extremely positive right now. From there we can look at electrical equipment, manufacturing, or mechanical contracting to build the data centers required.
But again, it is way too difficult to diagnose at the macro level. It will likely take much more time to see it, if at all, at the US Industrial Production level.
Q: Are there any jobs or skills that could see increased demand because of AI?
Connor: I think one of the most in-demand jobs now will be adding talent to an AI implementation team, including onboarding someone who can demonstrate how to properly use and implement AI to drive business forward.
It is essentially the same situation as with robotics 30 years ago. People were thinking, “I do not want to be the person who is being automated out by a robot. I want to be the person installing the robots, performing maintenance, working on software, and other things that support robotics.” The fastest impact of AI on labor will be felt by those with white-collar jobs as efficiencies increase.
The tougher nut to crack will be on the physical goods side of the economy, such as with construction. If we need more tradesmen, electricians, plumbers, pipefitters, etc., it is unlikely that we will have an AI version of those anytime soon.
Q: Will small businesses have the same resources to effectively implement AI into their business the way a larger business can?
Connor: Big manufacturers and large-scale automation require a massive capital investment. Big companies with deep pockets will have the resources for this kind of spending, whereas small companies just cannot do that.
Some bigger companies are already throwing gobs of money at AI. While they may not get the ROI they are looking for, they are still going to try. In some ways, these larger businesses will essentially have to be AI troubleshooters.
However, small companies do have an advantage in that they are a bit more nimble and able to identify needs faster. Even so, not every small business can afford to invest in AI.
Q: When Could AI influence consumer behavior or spending patterns?
Connor: At the aggregate level, probably not. I think the businesses that leverage AI early with more sophisticated marketing and targeted advertising might be able to extract higher rates of return on their advertising dollars spent; however, I do not think it will move the needle at the overall consumer level much at this time. Perhaps in the long term as AI helps improve productivity and employees get paid more, consumers will have more money to spend.
On the other hand, if one million people get knocked out of the labor force because their job gets automated by AI, consumers will have much less to spend. So, it can be cut both ways depending on how the technology develops.
Q: Does ITR Economics provide any forecasts for AI?
Connor: Unfortunately, the data just does not exist yet. AI is still in it is infancy. It is still in its early days in terms of the data available. We do not have rolling data history to build rates-of-change from – we would need multiple years of data history. Right now, we are paying close attention to everything surrounding AI. We do, for example, have data on those industries I mentioned before benefiting positively from AI adoption. Please reach out to us if you have needs in that space.
For a deeper dive into the impact and future of AI, automation, and productivity, become an Insider™ member today for access to Connor Lokar’s monthly Business Series Webinars! Enjoy a sneak peek of the insights from his July webinar on the subject.