Bottom Line: AI investments follow the historical pattern of the productivity paradox: measurable aggregate effects are delayed by years, even as individual workers become significantly more efficient.
The Federal Reserve Bank of San Francisco draws parallels between today’s massive AI investments and the delayed productivity gains from the Internet in the 1990s. While individual employees work faster with generative tools, macro data has so far shown no broad productivity surge.
A report from the Federal Reserve Bank of San Francisco documents a statistically striking discrepancy in the current economic situation: Gross domestic product is growing robustly, while employment growth is declining and productivity is stagnating or – as in the first quarter of 2026 – declining. An investigation report from the London School of Economics from the previous year quantified the time-saving potential of generative AI tools in certain professional fields at up to a full working day per week per employee. Economists refer to this mechanism as capital deepening: workers gain access to better capital equipment and increase their individual performance – comparable to mechanization in construction.
Historical parallels explain the delay: In the early and mid-1990s, the global economy experienced a similar productivity paradox. Despite enormous investments in information technology, measurable aggregate economic efficiency gains were delayed for years – a phenomenon that characterized the global economy between 1970 and 1990. Nobel laureate Robert Solow coined the apt diagnosis in 1987: “You can see the computer age everywhere except in the productivity statistics.” Federal Reserve researchers see the same structural features in the AI situation and emphasize that it is extremely difficult in real time to determine precisely the beginning of a long-term growth phase.
The current divergence is also evident in two different metrics: labor productivity – output per unit of work – has recorded solid gains in recent years. Total factor productivity (TFP), which measures how efficiently an economy converts all resources deployed into output, has however stagnated since the end of the pandemic. Fed researchers interpret this to mean that while individual employees work faster and more productively, the overall economy has not (yet) gained efficiency from this – possibly because companies still need to adjust their organizational structures and processes to fully utilize the new capabilities.
Source: www.it-daily.net · Published June 21, 2026
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