AI promises higher productivity but “risks” for labour markets

“ O aI development raises fundamental questions about the future of work and income distribution. So far, such drastic work shifts have not yet taken place on a large scale, but there are signs that adjustments will occur,” warned Hernández de Cos at the annual general meeting of the institution in the Swiss city of Basel.

US industries with higher exposure to AI experienced lower employment growth than other less exposed industries, Hernández de Cos added.

Therefore, “the transition to a more productive economy driven by the AI carries risks,” says the central bank in the annual report.

The AI finds applications in more tasks and occupations and can intensify job loss.

It is unclear whether the AI creates new jobs or extends the demand for existing jobs sufficiently to compensate for the destroyed.

The implications for monetary policy will depend on how these tensions are resolved.

If AI continuously increases productivity, the economy can sustain higher consumption growth and the natural interest rate increases.

The natural interest rate is that which neither prevents nor drives economic growth.

“ But if AI-induced automation displaces labor and consumption income, reducing incentives to innovate, a strangulation in demand can become a binding restriction on growth,” Hernádez de Cos said.

In this case, the natural rate of central banks would be lower due to the fall in demand.

The AI also has implications for inflation, it can increase it, but it also reduces it, according to the central bank.

The huge investments in AI, especially in the USA, create inflationary pressures.

The five largest climbers, which are the largest cloud service technology companies, such as Amazon, Microsoft, Google, Oracle and IBM, will spend more than a billion dollars on AI-related investments in 2025 and 2026, according to BPI numbers.

So far, the AI has driven growth through real and financial channels, but the question is whether this can be maintained.

A sharp fall in the prices of AI-related companies may occur if interest rates rise or if AI results are disappointing, something that would also affect the private credit with which the AI is financed and could greatly harden financial conditions.