New artificial intelligence technologies can help end our period of record inflation, the head of the worlds largest asset manager argued on Wednesday.
A global slowdown in productivity is a reason why we have such sticky inflation, BlackRock CEO Larry Fink said during the companys investor day event, according to Bloomberg.
A.I. has the huge potential to increase productivity, and transform margins across sectors, he predicted, which would bring down the inflation, reports the Financial Times.
U.S. prices rose 4% year-on-year in May, which is the lowest rate of inflation reported in over two years. Yet core inflationwhich excludes more volatile energy and food pricescame in at 5.3%, staying above 5% for the 18th consecutive motnh.
Fink warned a few weeks ago that inflation was still too strong, too sticky, and so would lead to two to four more interest rate hikes from the U.S. Federal Reserve. (The Fed on Wednesday held off on raising rates again, but forecast two more increases before the end of the year.)
A.I. and productivity
Companies hope that generative A.I.a category of tools that include OpenAIs viral chatbot ChatGPTcould automate a large swathe of knowledge work.
The new technology could add anywhere between $2.6 trillion to $4.2 trillion to the global economy, estimates McKinsey Global Institute in a report released Wednesday. Critically, the firm estimates that A.I. could automate work activities that absorb 60% to 70% of employees time today, and in turn grow labor productivity by between 0.2% to 3.3% each year.
Yet this improvement could come at the expense of higher-wage knowledge workers previously considered to be relatively immune to automation, the consulting firm warns.
Remote work
Fink might see A.I. as a way to reverse a fall in productivity caused by a very different phenomenon: The rise of remote work.
Last September, BlackRocks CEO blamed the rising trend of working-from-home for sticky inflation. We have to get our employees back in the office, he said in a Fox Business interview.
At the time, the asset manager was pushing its employees to follow its mandate to come into the office three days a week. Fink said the request was a key element in bringing down inflation: rising productivity.
Labor productivity has continued to decline since then, dropping by 2.1% in the first quarter of the year, according to the Bureau of Labor Statistics.
Surveys find that managers often report lower or unchanged productivity from remote workers, and CEOs like Metas Mark Zuckerberg and Salesforces Marc Benioff argue that working-from-home is particularly harmful to new hires.
However, economists warn against tightly connecting declines in labor productivity and remote work. One reason for a fall in productivity could be imperfect hybrid work arrangements, such as when companies ask people to come in for a few days a week without determining how such a system would work in practice.
But increased labor churn from job-hopping individuals during the Great Resignation could also lead to reduced productivity, EY-Parthenon chief economist Gregory Daco previously suggested to Fortune.
Because people were job-hopping so regularly, there wasnt really a chance to bring them up to the speed, or productivity, that a former worker wouldve had, he said.
