00:00 Speaker A
AI um elements are bidirectional. I mean, I know it was a tailwind last year, but it could potentially be a tailwind this year. I think the question we’re all probably wondering is: What are the productivity gains on the positive side, and how quickly will we see job losses and hiring suspensions on the negative side?
00:15 Speaker B
Yes, yes, good point. Therefore, demand is supply. So most of the gains from AI last year were demand-driven. AI has improved productivity slightly, but only just barely.
00:26 Speaker B
This year might be different. You could be more productive. So if you look at the history of technologies like the Internet as a modern case study, there are benefits like increased productivity, increased profits that I mentioned earlier, higher stock prices, and those benefits spread throughout the economy, creating other jobs, and history will say that you lose jobs here because of technology, but you increase jobs over there because of increased wealth and income. And the bottom line is that the job market is doing well.
00:54 Speaker B
I think that’s probably what will happen in 2026. It’s going to be a tie in terms of what it means for the job market, but it’s a risk. So if AI comes out faster and companies adopt and implement AI faster and the productivity gains become more substantial and the economy doesn’t have time to adapt to it, that could be a problem, right? Because the economy is already not creating jobs. If the productivity gains from AI are so great that AI causes job losses, that could be a problem in 2026.
01:21 Speaker A
And then the third item that you’re watching closely is both monetary and fiscal stimulus. Well, I think you actually think there’s going to be more rate cuts this year than the market is pricing in. Maybe it’s because you’re more pessimistic about the job market?
01:42 Speaker B
Yes, that’s exactly right. I mean, I think the Fed obviously has a tough job, right? That’s because tariffs and immigration policies slow growth and raise inflation. So how will the Fed react? But my calculations are that the headwinds will be strong enough, the job market will be weak enough, and the inflation issue will be less of an issue, so I think we’ll see further cuts in 2026.
02:05 Speaker B
There are a lot of them, but is it a quarter point cut? Two? Three? That’s a reasonable argument. I’m predicting three. That’s what I would expect and expect, but, you know, I don’t think I would argue too hard with anybody if they said two, one, four.
