Employees using AI are working faster, but the economy isn't more efficient. A look at what happened in the pre-Internet era might explain why | Fortune

Economic expansion continues in 2026 even as job growth slows, suggesting rising productivity among employed workers. Measured productivity growth has barely improved in recent years and slowed in early 2026, creating a mismatch with the strength of the economy. Technologists argue AI could optimize workflows and increase productivity, even if the effect has not yet appeared in official data. A study from the London School of Economics reports that in some professions, workers using AI can produce the same output in less time, saving up to a workday per week. Economists describe this as capital deepening, where better tools raise individual productivity. A Federal Reserve Bank of San Francisco brief compares today’s AI spending to early Internet adoption, when firms faced a productivity paradox that later resolved as a lag.

"Economic expansion is still going strong despite job growth slowing to a trickle, suggesting productivity among those currently employed is rising. But by many measures, productivity growth has barely budged in recent years, and slowed in the first quarter of 2026. Those things usually can't be true at the same time."

"Technologists claim AI will help optimize workflows and supercharge the U.S. economy's productivity-a measure of how efficiently resources such as labor are being converted to goods and services. While that growth has yet to show up in the data, AI might be responsible for the discrepancy in productivity statistics so far."

"In certain professions, employees who use AI are more likely to produce the same amount of work in less time, potentially saving an entire workday a week, according to a study by the London School of Economics last year. Economists call this an example of capital deepening, or when workers gain access to better tools and their individual productivity rises as a result-like when a construction worker trades in a shovel for a mechanical excavator."

"There's another example of this process that might be more analogous to the age of AI, put forward in a research brief published Tuesday by the Federal Reserve Bank of San Francisco. Just as with companies spending lavishly on AI integration today, economists analyzing the first days of the Internet in the early and mid-1990s might have been similarly puzzled. Employees suddenly had access to groundbreaking technology, but many firms remained stuck in the trenches of a " productivity paradox " that plagued the U.S. between the 1970s and 1990s as massive investments in IT failed to translate to improved efficiency."

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